18.04.201800:08:00UTC+00IBM Slides after Profit Margin Disappointment

International Business Machines Corp. reported profit margins that clocked in below Wall Street estimates, causing its shares to slide 6 percent in extended trading.

The decline in its share price came despite breaking an almost six-year streak of revenue growth declines in the second quarter.

In recent years, the technology company shifted its focus to higher-margin businesses including cloud computing, cybersecurity, and data analytics, to offset a slowdown in its legacy hardware and software businesses, but the move is not progressing as fast as some shareholders had expected.

While the company's revenue and profit topped estimates, the firm's adjusted gross profit margin declined 43.7 percent from 44.5 percent a year prior.

The firm said the fall in gross margin was mostly because of “significant” one-time charges.

During an earnings call with analysts, IBM CFO James Kavanaugh said the firm reduced costs and took a $610 million charge during the first quarter, but did not disclose details.

The firm said it had a tax benefit of $810 million due to changes in the U.S. tax law.

IBM retained its expectation for full-year adjusted earnings per share of at least $13.80, while analysts were projecting more, with the consensus at $13.83. The company's revenue increased 5 percent to $19.07 billion in the quarter with 65 percent increase in sales from security services. Cloud revenue increased 25 percent.

Net profit declined to $1.68 billion or $1.81 per share, in the first quarter ended March 31, from $1.75 billion or $1.85 per share a year prior. Earnings per share excluding items clocked in at $2.45 per share, surpassing the average estimate of $2.42.