IBM Shares Rally 0.7% Premarket After Q2 Warning; Morningstar Holds $260 Price Target

IBM-25.23%
IBM shares rose 0.7% in premarket trading on Wednesday following weak preliminary results, with the company expecting second-quarter revenue of $17.2 billion (up 1%) and a gross profit margin decline of 100 basis points to 57.7%. The company cited a faster-than-expected shift in client spending from software to AI servers, with infrastructure business declining 7%. According to Morningstar, IBM clients are more likely to delay rather than cancel mainframe upgrades, and the research firm maintained its $260 price target, calling the sell-off exaggerated and noting that shares look moderately undervalued. IBM's long-term AI opportunities are expected to come from hybrid cloud and data software rather than mainframe-related offerings.
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