00:00Think about that tailwind from AI that the CEO was telling Caroline Hyde about.
00:04You're not necessarily seeing it in this report, Brent.
00:09Yeah, that's right. I mean, software business in line. Remember, it's Q1.
00:13Q1 is typically a pretty light quarter for software.
00:16So I think you can chalk this up to they had a constant currency deceleration and growth, 11% in
00:23Q4, going to 8.
00:25So that on the surface looks not great.
00:29And then this fear around AI that every investor has that software is going to get completely run over.
00:35And why would I own software when I can own all the AI infrastructure, energy, semis, storage?
00:43That's doing little to shake this, even when you look at ServiceNow's initial reaction on software.
00:50So we're living in a world right now where our clients, the institutional investors, are very negative software.
00:58And I understand that tactically, given what's going on in the rest of tech.
01:03So I think at the surface, look, it's a beat.
01:06They had a good and okay number.
01:09The revenue for software was in line.
01:11Everyone wanted a bigger beat.
01:12But to your point, like an inline just creates more fear.
01:16Is this creating AI stall?
01:17Are CIOs stalling with IBM as they race towards anthropic and open AI?
01:23Are they trialing all these AI systems?
01:26And, you know, why would you give money to a software company right now when you have all these new
01:30technologies you should be trying?
01:32So I think those are natural that we're going to see that.
01:35Ultimately, IBM's an infrastructure company, these AI agents can run on IBM.
01:41We think they have pivoted to a software-first company.
01:45They are doing a fantastic job in terms of running this in a disciplined way with double-digit software growth
01:52on a reported basis.
01:53It's, you know, continued focus on AI and shifting to consultants toward an AI-led model.
02:00And then, you know, they have a quantum story that starts to start, you know, to kick in a couple
02:04of years from now.
02:06So, you know, overall, stable, consistent.
02:09It's just it's hard to shake this AI narrative across our whole subsector.
02:13And I think that's the big issue.
02:15And so, Brent, in just the minute we have left with you, I mean, given those different cross currents, the
02:20story that the company has to articulate,
02:23I mean, what do you want to hear from executives on the call a little bit later?
02:27I think that they've committed to the, you know, the growth rate for the year.
02:31They haven't changed their forecasts.
02:32And the question becomes, is AI creating a tailwind or a headwind in the short term as you go through
02:39these evaluation cycles?
02:40So the number one question I have is, what is going on in terms of what you're seeing in sales
02:45cycles?
02:45And are deals getting delayed because of this evaluation mode that we're seeing from many CIOs and what they're going
02:52through?
02:54And secondarily, their software book of business and AI is the second most important question.
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