International Business Machines IBM reported better-than-expected first-quarter 2025 results, beating estimates on both earnings and revenues, driven by the strength of its AI business. It also offered an upbeat sales outlook for the ongoing quarter. However, the stock declined 7% in after-market hours due to federal contract cuts, making IBM shares an excellent buy.
Investors can now consider ETFs with the highest allocation to this tech giant. These funds are First Trust NASDAQ Technology Dividend Index Fund TDIV, FT Vest Technology Dividend Target Income ETF TDVI, AXS Green Alpha ETF NXTE, SPDR Portfolio S&P Sector Neutral Dividend ETF SPDG and Pacer US Cash Cows Growth ETF BUL.
IBM’s earnings per share came in at $1.60, surpassing the Zacks Consensus Estimate of $1.42 but declining from the year-ago earnings of $1.68. Revenues grew 2% year over year to $14.54 billion and edged past the consensus estimate of $14.46 billion.
The robust results were driven by strength in software products. Software revenues grew 7% to $6.34 billion while Consulting revenues fell 2% year over year to $5.07 billion. The company said its generative AI book of business grew by almost $1 billion in the first quarter to more than $6 billion. This indicates that clients globally are turning to Big Blue to enhance their enterprises by using AI (see: all the Technology ETFs here).
IBM issued a second-quarter revenue forecast of $16.40-$16.75 billion. The Zacks Consensus Estimate is pegged at $16.35. It also reaffirmed its goal of achieving at least 5% revenue growth in 2025 on a constant currency basis.
Despite the robust results, shares declined as IBM disclosed that the U.S. government's Department of Government Efficiency (DOGE) canceled 15 federal contracts with the company, totaling approximately $100 million. While this amount represents less than 1% of IBM's consulting backlog, it created uncertainty among investors regarding IBM's future government business prospects.
ETFs in Focus
First Trust NASDAQ Technology Dividend Index Fund (TDIV)
First Trust NASDAQ Technology Dividend Index Fund provides exposure to dividend payers within the technology and telecommunication sector by tracking the Nasdaq Technology Dividend Index. It charges 50 bps in annual fees and holds about 90 securities in its basket. Of these firms, IBM takes the top spot, making up 8.7% of the assets. First Trust NASDAQ Technology Dividend Index Fund has amassed $2.4 billion in its asset base while trading in a volume of around 190,000 shares per day.
FT Vest Technology Dividend Target Income ETF (TDVI)
FT Vest Technology Dividend Target Income ETF is an actively managed fund that seeks to invest in U.S. securities contained in the Nasdaq Technology Dividend Index and utilize an "option strategy" consisting of writing(selling) call options on the Nasdaq-100 Index and/or the S&P 500 Index, or ETFs that track the Nasdaq-100 Index or the S&P 500 Index. It holds 90 securities in its basket, with IBM taking the top spot at 8.7% share. FT Vest Technology Dividend Target Income ETF has accumulated $68.9 million in its asset base and trades in a volume of 55,000 shares per day on average. It charges 75 bps in annual fees (read: 5 Dividend ETFs Surviving the Tariff Turmoil Past Month).
AXS Green Alpha ETF (NXTE)
AXS Green Alpha ETF is an actively managed portfolio seeking long-term capital appreciation. It invests in Next Economy companies selected by Green Alpha Investments for their attractive growth prospects and demonstrates a commitment to promoting a sustainable environment and economy. It holds 64 stocks in its basket, with IBM taking the second spot at 6.7% share. With AUM of $37.9 million, AXS Green Alpha ETF charges 100 bps in annual fees from investors and trades in a solid volume of about 4,000 shares a day.
SPDR Portfolio S&P Sector Neutral Dividend ETF (SPDG)
SPDR Portfolio S&P Sector Neutral Dividend ETF follows the S&P Sector-Neutral High Yield Dividend Aristocrats Index, which measures the performance of the large, mid and small-cap companies in the S&P Composite 1500 Index that have increased or maintained their dividend for seven or more consecutive years while seeking to mirror the sector weights of the S&P Composite 1500 Index. It holds 289 stocks in its basket, with IBM occupying the second position at 5.2% of the assets. SPDR Portfolio S&P Sector Neutral Dividend ETF charges 5 bps in annual fees and trades in an average trading volume of 3,000 shares. It has amassed $8.6 million in its asset base.
Pacer US Cash Cows Growth ETF (BUL)
Pacer US Cash Cows Growth ETF is a strategy-driven ETF that aims to provide capital appreciation over time by screening the S&P 900 Pure Growth Index for the top 50 companies based on free cash flow yield. It holds 52 stocks in its basket, with IBM taking the third spot at 5.1% share. Pacer US Cash Cows Growth ETF has amassed $67.1 million in its asset base and trades in a volume of 10,000 shares. It charges 60 bps in fees per year from investors.
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International Business Machines Corporation (IBM): Free Stock Analysis Report First Trust NASDAQ Technology Dividend ETF (TDIV): ETF Research Reports Pacer US Cash Cows Growth ETF (BUL): ETF Research Reports FT Vest Technology Dividend Target Income ETF (TDVI): ETF Research Reports SPDR Portfolio S&P Sector Neutral Dividend ETF (SPDG): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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