Breakfast News: IBM Hit by Inflation's Long Shadow

Breakfast News: IBM Hit by Inflation’s Long Shadow

April 23, 2026

Source: Image created by Jester AI.

1. IBM Sinks as Geopolitics Weigh

IBM (IBM +0.00%) fell over 7% ahead of the market open despite quarterly results beating revenue and earnings estimates, as cautious guidance for the full year weighed on sentiment, something CEO Arvind Krishna blamed on broader geopolitical uncertainty.

• “A lot of consumer companies are my clients”: Krishna pointed out that higher inflation could see people spend less at companies such as Walmart (WMT +0.37%), which indirectly impacts IBM from reduced activity.
• “IBM’s consulting business will be both threatened and supported by more sophisticated AI tools”: In late February, TMF chief investment officer Andy Cross explained the Hidden Gems recommendation is under pressure from AI disruption, but “mainframes remain necessary infrastructure for hugely complex computing systems.”

2. Prominent Pre-Market Action Roundup

• ServiceNow (NOW 2.54%) fell 12% ahead of the opening bell after earnings revealed a hit to subscription revenue due to the conflict in the Middle East. The Stock Advisor rec by Team Hidden Gems did still post a 22% overall revenue increase year over year.
• Goosehead Insurance (GSHD 2.99%) rocketed over 15% higher in pre-market trading after quarterly earnings per share rose by 45% thanks to gains in new business commissions and renewal royalty fees.
• Tesla (TSLA +3.93%) popped 5% after the market closed before giving back all gains and losing over 2%, as results showed capex spend for this year will exceed $25 billion, roughly three times last year’s outlay. Recommended by both Team HG and Team RB, Tesla CEO Elon Musk said on the earnings call he thinks “Optimus will be our biggest product, not just Tesla’s biggest product ever, but probably the biggest product ever.”

3. MSFT Reveals Historic Aussie AI Deal

Microsoft (MSFT 1.33%) confirmed a $17.9 billion investment in Australia for the next three years to boost computing and AI capacity, as it flags higher demand coming from the country.

• Big push to expand AI build out around the globe: The funds will go toward expanding AI supercomputing and cloud infrastructure in the country, as Microsoft joins the race with peers to diversify capex spend away from the U.S.
• The move was praised by Australian Prime Minister Anthony Albanese: Part of the investment will go toward promoting AI skills development, a move welcomed by the government, highlighting the goodwill toward Microsoft extending beyond purely commercial benefits.

4. A Selection of Upcoming Stock Advisor Earnings

• Kinsale Capital (KNSL 1.29%) reports after the closing bell. Strong underwriting profits aided performance last quarter, with revenue expected to increase by 11.4% versus the same period last year. The stock is recommended by both Team Rule Breakers and Team Hidden Gems.
• Gilead Sciences (GILD 2.13%) also releases earnings following the market close. First recommended back in 2010 by Team RB, Gilead will be aiming to carry momentum around HIV and liver disease treatments forward from last quarter.
• Union Pacific (UNP 0.09%) posts results ahead of the market open, with elevated fuel costs and continued scrutiny around the Norfolk Southern (NSC 0.01%) merger in focus for the Team Rule Breakers rec.

5. Your Take

IBM is up 85% over the last 5 years. Across the same period, the S&P 500 is up 70%. However, the stock is down 15% this year, including its worst single-day drop in over 25 years after Anthropic demonstrated that Claude Code could automate COBOL modernization: IBM has a high-margin business built around maintaining, consulting for, and modernizing these mainframe systems.

Do you think IBM can be a market beater over the next 5+ years from here, or has AI fundamentally changed the investment case?

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