IBM price, Q1 earnings: Stock sinks 6% after news that Elon Musk’s DOGE cuts thwarted 15 government contracts

Over the past 30 days, many big-name tech giants have seen their stock prices fall hard, largely thanks to President The President’s chaotic tariff rollout. For example, Apple (Nasdaq: AAPL) has seen its shares fall 11% over the past month, while Nvidia has seen its shares fall (Nasdaq: NVDA) fall over 12%.

But until yesterday, IBM (NYSE: IBM) was one of the big-name tech giants that rode out the tariff storm pretty well. While the company’s stock price did tank along with the rest of the markets in early April, it has recovered nicely since then and, as of the close of bell yesterday, its shares were actually up just a bit (about 0.6%) over the past 30 days. 

But then IBM announced its Q1 2025 results yesterday, and its stock sank after hours. And today, as of the time of this writing, IBM shares are down more than 6.75% in pre-market trading. The main reason? You can blame Elon Musk’s DOGE.

IBM’s Q1 2025 results

When a stock drops after a company reports its latest quarterly results, it’s natural to assume it is doing so because the company in question posted poor numbers. But that actually wasn’t the case with IBM yesterday. By all accounts, IBM had a pretty good quarter. Here are its most salient numbers:

• Revenue: $14.5 billion (up 1%, or up 2% on a constant currency basis)
• Earnings per share (EPS): $1.60

As noted by CNBC, those critical metrics actually beat analysts’ estimates, which had expected revenue of $14.4 billion and an EPS of just $1.40.

“We exceeded expectations for revenue, profitability and free cash flow in the quarter, led by

strength across our Software portfolio,” IBM CEO Arvind Krishna said in a statement announcing the company’s Q1 results. “There continues to be strong demand for generative AI and our book of business stands at more than $6 billion inception-to-date, up more than $1 billion in the quarter.”

But if this is the case, why did IBM’s shares drop? It’s all because of DOGE.

Elon Musk’s DOGE takes bite out of IBM’s government contracts’ biz

Unfortunately for IBM’s stock price, the company also announced last night that 15 of its government contracts had either been canceled or paused due to cuts initiated by Elon Musk’s Department of Government Efficiency (DOGE). 

Bloomberg reports that these cuts equate to about $100 million in future payments. Addressing the cuts on the company’s financial call, IBM’s chief financial officer, James Kavanaugh, said that federal sales account for less than 5% of the company’s overall revenue. However, Krishna noted that DOGE’s downscaling of the U.S. government did leave IBM’s consulting unit “more susceptible to discretionary pullbacks and DOGE-related initiatives.”

As noted by Reuters, the impact of the DOGE cuts on IBM’s business sent the company’s shares lower in after-hours trading yesterday.

IBM issues rare quarterly guidance

But IBM also announced something else yesterday—guidance for the second quarter. Historically, IBM has not issued quarterly guidance, but as Reuters notes, the company decided to do so now.

“We’ve chosen now, in light of the very unprecedented dynamic of uncertainty going on in the market, to give a second-quarter revenue guidance range. We felt incumbent upon ourselves to give as much transparency as possible to our investor group,” IBM’s Kavanaugh announced yesterday.

That forecast revealed that IBM expects Q2 2025 revenue of between $16.40 billion and $16.75 billion. That’s slightly above analysts’ forecasts of $16.33 billion, noted Reuters.

Still, that attempt at reducing uncertainty in investors didn’t do enough to counteract the effects that the DOGE cuts had. In premarket trading this morning, as of the time of this writing, IBM stock is down 6.75% to $228.90.

As of yesterday’s close of $245.48 before IBM’s Q1 results were released, the company’s shares had been up over 11.6% for the year so far—an impressive return considering all the market turmoil over the past three weeks.

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