IBM has reported a bigger-than-expected drop in first-quarter revenue, hurt by tapering demand for its latest mainframe computers and a stronger dollar.
Shares of the technology giant fell two per cent. The company reiterated 2019 adjusted operating profit of "at least" US$13.90 per share. Analysts on average were expecting US$13.91 per share.
Under Ginni Rometty's stewardship, the company has shed many of its traditional hardware businesses and beefed up the growth areas through deals such as its US$34 billion deal for Red Hat Inc, by far the company's biggest acquisition.
IBM returned to annual revenue growth after seven years in the last quarter of 2018, triggering expectations that its strategy was taking roots.
Shares of the company have gained about 18 per cent since reporting its fourth-quarter results in January.
However, in the reported quarter its cloud and cognitive segment, which includes analytics, cyber security and artificial intelligence, fell 1.5 per cent to US$5.04 billion, but beat FactSet estimates of US$4.18 billion.
Revenue from its other main segments also fell and missed FactSet estimates.
"We see limited upside to revenues due to currency headwinds, tough comps from the mainframe cycle, and a potential pull forward of software revenues into Q4," Bernstein analyst Toni Sacconaghi said.
IBM's revenue slipped 4.7 per cent to US$18.18 billion in the first quarter ended March 31 and missed the average analyst estimate of US$18.46 billion, according to IBES data from Refinitiv.
Its net income fell US$1.59 billion, or US$1.78 per share, compared with US$1.68 billion, or US$1.81 per share, a year earlier.
Excluding special items, the company earned US$2.25 per share and beat analysts' expectation of US$2.22 per share.
(Reporting by Sayanti Chakraborty in Bengaluru; Editing by Arun Koyyur)