IBM Warns and Stocks Fall | Stephanie Link's Market Analysis

chief investment strategist and portfolio manager at High Tower Adviserss as well as a CNBC contributor. You were probably glued to the screen. Is Leslie not amazing? What what >> she's incredible. >> She is. Can you distill it down? Uh the the highlights you've got Wells, you got then we had JP Morgan, then Bank America, which have all had big moves. So they did and we had record flows uh over the last couple of weeks into the banks. So a little bit higher expectations but I would summarize up by saying you saw growth, you saw profitability and better much better credit quality at all three banks. I think the lowest expectations were at Wells Fargo and they actually delivered pretty good numbers in line net interest income and net interest margins. Expenses were lower. Their efficiency ratio came in at 60%, expectations were for 63. So, they're doing all that they can to streamline the business while at the same time with the asset cap now lifted, they can focus on growth. I think this is the bottom for Wells Fargo and NIM this quarter. I think it's going to increase going forward. Sorry, sorry to interrupt, but IBM it's not may not be what it used to be in terms of bell weathers, but when you get a $40 move on a on a warning, when's all that companies haven't warned lately? Yeah, they warn of of better than expected results uh in in this new world. But IBM, >> look at that. >> IBM is is warning and it it it's had a big runup which it hasn't had in a while. Uh but it is down today. There is a letter uh from the CEO to investors and uh the company sees second quarter revenue 17.2 billion, software revenue up 5%, consulting revenue flat and adjusted earnings per share of $2.93 and infrastructure revenue actually down 7%. Uh also gross margins down 70 basis points. What do you think, Seth? Well, I own it, so I'm not happy about it. And it's a it's a shock. So, this now means it probably reinforces that AI and what is it doing to software? And that's the the the scare that people have had. And that's one of the reasons why software in general hasn't done so well. Software at 5%, I mean, oh my goodness, it was supposed to be at least double digits, maybe even into the teens. Um, and so that's that's that's very disappointing. Um, do you need to go somewhere and and and and have a drink or cry or something or you want to continue along with the >> needs to buy some tokens? >> Yeah, I'm worried about you, Steph. Uh, okay. Thankfully, let's go back to the banks then where we can talk about all the good things happening. >> Yeah. No. Uh, okay. So, going back to the banks. Um, so Wells Fargo did everything they could um in their control. Now they're going to focus on f uh revenue growth and a as the asset cap has been lifted. So that's good. I think very low expectations at Wells Fargo. I think that's a buy. Um JP Morgan, I mean, my goodness, profits were up 41%. They had record revenues across every division. Um I think obviously the the big call out is fees up uh in investment banking up 30%. Uh the whisper number was up 20%. Um and they also had ROE of 24%. So really good numbers. I think people are a little spooked because of the higher expenses. That was really expected uh to be honest. Uh so um but at 2.7 times book value the stock you you have to be perfect. Um and uh there was a little bit of a blemish on the expense side. Uh Bank of America clear positive call out for now. I mean I don't think I've ever seen investment banking results up 50% at this company and their wealth and investment management business up 70%. really really great numbers. Um profits were up 27%. Um and uh across the board uh credit quality again that's a big theme for all three of these companies. Net charge offs and provisions for bad loans much better than expected. So they're growing and they're seeing better profitability and they're also seeing better credit quality. I think that's that that bodess well. The only thing is it's uh the expectations were high. So um let them settle in and and pick your spots. I know it's a sore subject, but uh IBM expected second quarter infrastructure revenue decline played out worse than our expectations, Steph. So that that that that just hit uh as well. Do you think and we're going to ask Jimoth this in a second. Do you think that this puts a question mark over AI in in the building or or it just basically says yeah, software is going to be disintermediated or something because of AI? So, is it a negative for air or it's just what we already knew was going to happen? >> Well, I think it's coming to pass that AI is having an impact on software. I think that's exactly the the issue. This is what we've been nervous about for a while and uh and it's it's coming to unfortunately into fruition. I will say I mean this is an amazing CEO. He has done an incredible job at turning this company around, but the bulk of their profits are software. So if they're guiding down obviously they're getting impacted. It says it says that a couple of uh or several deals failed to close in the quarter. So we have to get more color on that as well. But you know this has been a good stock under Arvin Krishna and >> yeah the miss is definitely Steph the miss is definitely where you're what you're pointing to because 293 is off of you know it's 301 was was the estimate for for adjusted earnings and then a little bit lower on on revenue 172 uh versus an estimate of 178. So that's below but I think it but uh you can go crying your beer. Well, that could be a crime