IBM shares fell about 25% in July, their worst day in 115 years, after the company said customers had shifted spending to memory and storage products and delayed major contracts. The third-quarter report on October 21 showed revenue up 5% to $17.1 billion, operating earnings per share up 11% to $2.95, and software growth of 9% at constant currency. The author estimates organic software growth was closer to 4% after excluding the roughly $11 billion Confluent acquisition, and that meeting the roughly $32 billion full-year software target implies fourth-quarter software growth of about 4%. Debt rose to $63.8 billion after $11.4 billion of acquisitions this year, though the dividend appears well covered by free cash flow. The author still sees IBM as a long-term holding for its enterprise AI position and customer base, despite the market's muted reaction.
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