IBM (IBM, Financial) just threw a curveball into the market narrative. After years of sidestepping quarterly forecasts, Big Blue decided it’s time to talk numbers. The company issued rare Q2 revenue guidance between $16.4 billion and $16.75 billion—topping Wall Street estimates—and doubled down on its 2025 target of at least 5% revenue growth. First-quarter earnings came in hot: $1.60 per share on $14.5 billion revenue, beating expectations. The kicker? It’s not just legacy hardware or consulting. IBM’s high-margin software unit did the heavy lifting this time, backed by the company’s growing AI bets.

But not everything was smooth sailing. IBM disclosed that 15 U.S. government contracts—worth around $100 million—were abruptly canceled under a federal cost-cutting push. That news sent the stock down 6.8% at 6.52am in the premarket trading today. While the financial hit is small (less than 1% of consulting backlog), the psychological blow landed hard. Investors, already jittery about macro volatility and shifting U.S. policies, were quick to react. Unlike peers more exposed to federal spending, IBM has the advantage of diversification—especially into enterprise software and AI, which have been its safety net in stormy times.

Here’s where it gets interesting: IBM’s AI Book of Business jumped by another $1 billion this quarter, pushing the total above $6 billion. It’s a strong signal that the company’s pivot to AI isn’t just PR—it’s translating into deals. For a company that once posted 20 straight quarters of revenue declines, this is a full-blown turnaround. IBM’s evolution from old-school IT to modern-day AI powerhouse is starting to look real—and increasingly investable.