DOGE risk to consulting sinks IBM
IBM is down by the most in almost exactly a year, despite reporting Q1 numbers Wednesday afternoon that beat analyst forecasts.
In fact, the stock saw a reflexive jump in the immediate aftermath of the report, but the optimism fizzled almost immediately after company executives tiptoed their way through Big Blue’s conference call.
Analysts seemed especially interested in somewhat sluggish results from IBM’s consulting business, where sales slipped 2% (essentially flat on a constant currency basis), and whether that may have reflected the effects of Tesla CEO Elon Musk’s DOGE effort to rip up root and branch the way the federal government operates.
While stressing that sales to the federal government account for less than 5% of total revenues and 10% of its consulting revenues, company executives acknowledged some risk to their business selling technology services to Uncle Sam.
CEO Arvind Krishna said:
“To Consulting and DOGE, yes, we are not immune from all those activities, just like everybody else. We had a couple of contracts that were impacted in the first quarter. You would expect USAID, where we did some work was impacted, but not really in most other cases. The work we tend to do is much more mission-critical, is much more about building the government systems which make them more efficient and so, we see them carry on. Now, it’s hard to predict where that goes over the rest of the year. So I’m not going to try and make that prediction on DOGE and Consulting, except to caution, as Jim said in his prepared remarks, if there is pressure in the economy, Consulting tends to see headwinds before other parts of the business.”
Analysts seemed especially interested in somewhat sluggish results from IBM’s consulting business, where sales slipped 2% (essentially flat on a constant currency basis), and whether that may have reflected the effects of Tesla CEO Elon Musk’s DOGE effort to rip up root and branch the way the federal government operates.
While stressing that sales to the federal government account for less than 5% of total revenues and 10% of its consulting revenues, company executives acknowledged some risk to their business selling technology services to Uncle Sam.
CEO Arvind Krishna said:
“To Consulting and DOGE, yes, we are not immune from all those activities, just like everybody else. We had a couple of contracts that were impacted in the first quarter. You would expect USAID, where we did some work was impacted, but not really in most other cases. The work we tend to do is much more mission-critical, is much more about building the government systems which make them more efficient and so, we see them carry on. Now, it’s hard to predict where that goes over the rest of the year. So I’m not going to try and make that prediction on DOGE and Consulting, except to caution, as Jim said in his prepared remarks, if there is pressure in the economy, Consulting tends to see headwinds before other parts of the business.”
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