International Business Machines (IBM) income growth seemed unshakable until today, so solid that shares of this well-known company had even managed to recover to levels seen before Donald Trump's first and severe official tariff announcements in early April, but the prosperity seems undermined by the contracts that DOGE cancelled. The Department of Government Efficiency, or DOGE, under the U.S. sitting administration is indulging in massive cost cuts, which affected 15 IBM contracts amounting to about $100 million. This represents less than 1% of the order backlog in IBM’s consulting unit, according to its finance chief James Kavanaugh, who appeared to Reuters TV on Wednesday night for comments.

However, those contract cancellations created a rather deep and previously hidden trap that sent the surviving computer-age dinosaur's share price down by more than 7.5% compared to a daily range of $245-$250 per share on April 23, hours before the company's quarterly report, to below $230 in pre-market trading the following day. The news became the final straw of fretfulness to turn investors' negativity mood exactly at a time when tariff battles already clouded the crowd's outlook for the global economy.

To jolly up Wall St confidence, IBM even broke from its long-standing practice of not revealing further guidance ranges. Now its inner April to June sales projections lie in the range between $16.40 billion and $16.75 billion, well above the analyst pool's average estimate of $16.33 billion. "We felt incumbent upon ourselves to give as much transparency as possible to our investor group," James Kavanaugh commented. IBM CEOs also maintained their previous target of achieving quite a solid 5% sales surplus on a constant currency basis before the end of 2025.

Somewhat better-than-expected Q1 2025 sales, 0.9% up YoY to reach $14.54 billion vs $14.41 billion in consensus estimates could not decrease the extent of downward pressure, when it became known that IBM's consulting segment revenue fell 2% to $5.1 billion, even though this was roughly in line with nominal expectations, according to LSEG data. Earnings per share in Q1 was at $1.60, was more than twice lower than the company's absolute record at $3.92 in the Christmas quarter, but this should not be a one more cause for regrets, as the current number was also much better than preliminary analyst pool estimates of $1.40 per share, helped by high-margin software segment.

There are moments when a market sell-off, once started, cannot be calmed down overnight. Irrational reactions cannot be influenced in an instant coffee style, but soon the dust will settle. What is worrying now may soon turn into an opportunity to buy deals. One just needs to be attentive and monitor the dynamics of the asset day by day. Despite today's mess, we remain goal-oriented with the door open to IBM's next target area between $275 and $300.

What other reasoning behind a positive mid-term stance? IBM is supposed to be impacted minimally under U.S., China's or other countries' tariff horse-trading, as the company has very limited direct exposure outside the US. As an example of new opportunities for IBM's expansion is its so-called AI Book of Business, which is a cross sales combination of bookings and actual orders across various products. It stood at more than $6 billion from inception to date, as much as $1 billion up from the calculations made three months before.