Shares of International Business Machines (IBM) tumbled 8.18% in pre-market trading on Thursday, as investors focused on warnings of economic uncertainty and government contract suspensions, overshadowing the company's better-than-expected first-quarter results.

The tech giant reported Q1 adjusted earnings of $1.60 per share, surpassing analyst estimates of $1.40. Revenue also beat expectations at $14.54 billion, compared to the projected $14.40 billion. However, IBM's cautious outlook and revelations about its federal business sparked concern among investors.

CEO Arvind Krishna warned during the earnings call that "uncertainty may cause clients to pause and take a wait-and-see approach." The company disclosed that 15 of its government contracts were suspended due to cost-cutting initiatives by the Trump administration, amounting to roughly $100 million in lost business. This setback particularly impacted IBM's consulting segment, which saw a 2% drop in revenue for the quarter.

While IBM maintained its full-year guidance for accelerating revenue growth to 5%-plus and about $13.5 billion of free cash flow, the company's comments about near-term challenges weighed heavily on investor sentiment. The ongoing decline in IBM's legacy mainframe business and the potential for further discretionary spending pullbacks in its consulting division added to the market's concerns about the company's growth prospects in an uncertain economic environment.