Shares of IBM (IBM  ) tanked in early trading on Thursday, after the company reported upbeat first-quarter results.

The company reported a beat on the top and bottom lines but maintained its full-year outlook due to macro headwinds.

The IBM Analyst: Wedbush analyst Dan Ives maintained an Outperform rating, while cutting the price target from $340 to $320.

The IBM Thesis: The company witnessed stronger demand for AI adoption within software services, Ives said in the note.

Total revenues came in at $15.92 billion, up 6% year-on-year in constant currency terms. That's above Street expectations of $15.63 billion.

The company's "business flywheel continued to strengthen, with more clients turning to IBM to modernize core systems and scale AI across operations," Ives stated.

The company indicated that its GenAI businesses continued to accelerate, with 80% of backlogs coming from net new clients and ARR (annual recurring revenue) reaching $4 billion. Furthermore:

  • Software revenues grew 8% year-on-year in constant currency terms to $7.05 billion. They topped the consensus estimate of $7.02 billion. Ives credits this to "strength across the diversified portfolio."
  • Infrastructure revenues grew 12% year-on-year in constant currency terms to $3.33 billion, coming in slightly higher than Street expectations of $3.16 billion
  • Consulting revenues rose 1% year-on-year in constant currency terms to $5.27 billion, missing consensus estimates of $5.28 billion
IBM maintained its 2026 revenue growth outlook of 5%. The company is maintaining "a prudent approach to guidance due to the ripple effects of a difficult macro," the analyst said.

"We continue to believe IBM remains well-positioned to ride the wave of AI demand as its diversified portfolio and offerings gain traction while its productivity flywheel provides opportunities to expand margin while investing in innovation," Ives added.

IBM Price Action: Shares of IBM had declined by 8.10% to $231.51 at the time of publication on Thursday.