Tariffs + US government cost reduction worries are hard to dispel! IBM (IBM.US) Q1 results better than expected, stock price still falls after hours.

The "Blue Giant" IBM (IBM.US) stock price fell in after-hours trading, as the company's performance was not strong enough to reassure investors worried about tariffs and reduced spending by the U.S. federal government weakening the company's business. IBM announced on Wednesday that first-quarter sales increased by nearly 1% to $14.5 billion, exceeding market expectations; earnings per share, excluding certain items, were $1.60, also exceeding market expectations. IBM CEO Arvind Krishna said on a conference call after the financial results were announced, "Short-term uncertainties may cause customers to pause their transactions." However, he also stated that the company has "not seen any substantive changes in customer buying behavior". IBM's stock fell by about 7% in after-hours trading. Despite the general market downturn in recent weeks, IBM has been considered a relatively safe haven. The stock has risen by 12% this year, while the S&P 500 index has fallen by 8.6%. Evercore ISI analyst Amit Daryanani said that IBM has performed very well in the recent tariff disputes, so investors were expecting more "perfect" performance. IBM is focused on transforming from a traditional computer company to one that focuses on high-growth software and services. The company has expanded its product line through acquisitions, including the recent acquisition of HashiCorp Inc. in February and the planned acquisition of Apptio for $4.6 billion in 2023. IBM stated that orders for artificial intelligence consulting and software have exceeded $6 billion since mid-2023. This number is higher than the $5 billion disclosed in the January financial report. About 80% of orders come from the consulting department, with the remainder from the software department. The software business remains IBM's fastest-growing department, with sales in the first quarter up 7% to $6.3 billion. The consulting department saw a 2% decrease in sales to $5.1 billion in the first quarter. These metrics are in line with market expectations. Sales in the infrastructure department fell by 6% to $2.9 billion. Earlier this month, IBM released its latest large-scale mainframe system, stating that some business data will remain on customer-owned servers and will never be hosted in the cloud. CFO Jim Kavanaugh said that the quarterly results reflect the "persistence and resilience" of IBM's business. However, the cost-cutting efforts led by the U.S. Department of Government Efficiency (DOGE) are starting to have an impact. Kavanaugh stated that about 15 contracts with the U.S. federal government signed by IBM have been canceled or suspended, involving approximately $100 million in future payments. Kavanaugh added that sales to the U.S. federal government account for less than 5% of IBM's total sales. IBM executives noted that they are more cautious about the consulting business this year. Krishna said on the conference call that the department "is more susceptible to business cancellations and actions related to DOGE." IBM rare...