Shares of International Business Machines (IBM) fell more than 9% on Thursday as businesses rein in spending due to economic instability and rising interest rates, impacting the company’s consulting division.
The consultancy sector faced a decline in smaller discretionary projects, but analysts at J.P. Morgan expect that a robust backlog will help IBM regain momentum through 2024. They noted, “While software acceleration is positive, it was offset by a larger-than-anticipated downturn in Consulting, along with ongoing foreign exchange headwinds for the remainder of the year.”
To tap into the growing demand for AI-driven cloud data storage, IBM announced a $6.4 billion acquisition of cloud software provider HashiCorp. The software division showed a 5.5% increase during the quarter, but overall revenue came in at $14.46 billion, slightly below the estimated $14.55 billion, with consulting sales remaining flat. 
Following this news, IBM’s shares were down 9.3% to $166.98, potentially reducing its market capitalization by over $15 billion if the decline continues.
Evercore analysts commented, “This quarter was challenging, with a consulting slowdown countered by hardware growth.” They added that the focus now shifts to how IBM will drive revenue acceleration across both the consulting and software segments
