IBM cut its full-year revenue-growth outlook to 4 to 5 percent, from more than 5 percent

The winter outlook no longer holds. Alongside second-quarter results on July 22, IBM said it now expects full-year revenue to grow 4 to 5 percent in constant currency, down from the more than 5 percent it had guided to earlier in the year. Revenue for the quarter was $17.2bn, up 1 percent. Operating earnings, the figure IBM emphasizes, were $2.93 a share, up 5 percent, while earnings per share on a GAAP basis from continuing operations fell 2 percent, to $2.27.

Software did the work. Revenue there rose 5 percent, to $7.8bn, with Red Hat up 11 percent and the data unit up 19 percent. Consulting was flat at $5.3bn. Infrastructure fell 7 percent, to $3.8bn, held down by a 42 percent drop in the IBM Z mainframe line, even as the rest of that segment, the distributed servers and storage, grew 37 percent.

The cash target held. IBM still guides to about $1bn more in free cash flow this year, so the trim is to growth, not to cash generation. It is telling investors it will book slightly less revenue than it expected and convert it about as well, which is a narrower miss than a lowered headline usually implies. Whether software keeps offsetting the mainframe drag is the question the rest of the year answers.