IBM Earnings Top Forecast, but Revenue Falls; Shares Up

IBM's quarterly earnings beat Wall Street's expectations on Wednesday, sending its shares slightly higher in extended-hours trading.

IBM Sign
Aaron Brown: Photography
IBM Sign

The technology giant posted second-quarter earnings excluding items of $3.51 per share, up from $3.09 a share in the year-earlier period.

Net income was $3.9 billion, or $3.34 per share, down from $3.7 billion, or $3 per share, at the same time last year.

Revenue fell 3 percent to $25.8 billion from $26.67 billion a year ago.

Analysts had expected the company to report earnings excluding items of $3.42 a share on $26.28 billion in revenue, according to a consensus estimate from Thomson Reuters.

The company's shares rose 1 percent in trading after the closing bell. (Click here to get the latest quotes for IBM.)

"They modestly missed on the revenue line, partially due to forex, and slightly on software hardware revenue," said Amit Daryanani of RBC Capital Markets. "But the big message is they beat EPS handily, and they're raising the full-year EPS target, and that's probably enough for the stock to keep working. It's a sign that this company can keep executing despite the revenue headwinds they have."

Churning out higher earnings has become routine for IBM, one of the technology industry's bellwethers. Wednesday's announcement marks the company's 38th consecutive quarter that its earnings have climbed from the previous year.

But IBM's 3 percent drop in second-quarter revenue could unnerve investors, given the decline was larger than stock market analysts projected.

In April, the company announced an agreement to sells its retail store solutions business to Toshiba TEC.