IBM earnings were strong, so why is the stock price sliding today? Here’s what has investors spooked

IBM announced strong second quarter 2025 earnings that beat expectations on many points, helped in part by response to its new AI-focused mainframe computer. So why is the stock sliding today? First, a look at the results.

IBM Q2 2025 earnings results

Shares in the stock (NYSE: IBM) were down over 8% on Thursday in midday trading, after the tech giant beat expectations for “revenue, profit, and free cash flow” this quarter. The company reported revenue of $16.98 billion, topping expectations of $16.59 billion, with earnings-per-share (EPS) of $2.80, beating expectations of $2.64. It also raised its full year forecast.

“With our strong first-half performance, we are raising our full-year outlook for free cash flow, which we expect to exceed $13.5 billion,” IBM chief executive Arvind Krishna said in a statement. “IBM remains highly differentiated in the market because of our deep innovation and domain expertise, both crucial in helping clients deploy and scale AI. Our generative AI book of business continues to accelerate and now stands at more than $7.5 billion.”

That’s all good news for investors. In fact, IBM’s revenue increased nearly 8% year-over-year in the quarter, according to its earnings statement. So why the stock dive?

IBM stock price slides as earnings miss on software revenue

The answer: software revenue.

While revenue from software rose about 10% to $7.39 billion, it fell short of analyst expectations of $7.43 billion, CNBC reported.

“You’re seeing the stock pull back, because there’s just not a lot of room to miss,” Dan Morgan, senior portfolio manager at Synovus Trust, told Reuters. “This would be more evidence that software is not growing at the pace that the Street was expecting.”

At the time of this writing, the company had a market capitalization of $239.39 billion.