Tech
After shocking quarter, IBM insists that AI isn’t killing the mainframe
On Wednesday, IBM officially reported earnings and the news was as bad as everyone knew it would be.
While the 115-year-old company still generates boatloads of cash — $17.2 billion in revenue, $9.9 billion in gross profit, nearly 58% margins, and $2.2 billion in net earnings for the quarter — its results fell well short of Wall Street’s expectations.
It was such a bad miss that IBM CEO Arvind Krishna and the board took an unprecedented step of warning investors ahead of time that the earnings “was worse than our expectations,” offering everyone a sneak peek.
He published a “letter to investors,” last week sharing preliminary results. It warned of abysmal revenue in the company’s all-important “infrastructure” category and said that profit margins were also going to take a hit. The company’s stock instantly tanked 25%, it’s biggest single-day decline ever. Until then, the stock had performed well under Krishna’s six years of leadership, buoyed by the AI data center boom that had been lifting all boats.
On Wednesday, IBM also lowered its full-year growth forecasts, meaning this horrible quarter would impact the rest of the year. The culprit? IBM’s cash-cow mainframe business was down 42%.
That’s a cascading problem, because as CFO Jim Kavanaugh explained on the quarterly call with investors, IBM earns $3 in software revenue for every $1 of mainframe hardware it sells.
However, the CEO and CFO spent the call insisting that this was a temporary blip and all would be well soon.
What happened, they said, was that “tens” of customers that were due to buy a new mainframe during the quarter opted not to do so. That may not sound like a lot of customers, but mainframes are systems that cost hundreds of thousands to millions of dollars, and with maintenance contracts and software, generate many millions more.
The same AI boom that lifted IBM’s boat also sank it.
Instead of buying a new mainframe, these clients bought other hardware, Krishna explained. They were faced with astronomically high cost increases of 15% to 30% for data center gear and PCs.
“When they were faced with that issue, then they decided to move budget to those areas where they were having that extreme price,” Krishna said.
Enterprise hardware makers like Dell and HP have warned that rising costs on components like memory, caused by the AI build-out boom, have forced them to raise prices. Apple has said the same.
But Krishna promised that those customers will still buy their new mainframes eventually — along with their new software contracts. In fact, he said some of them have already done so this quarter. “We see no evidence of clients moving off the mainframe,” he said.
We’ll have to wait and see. But the tech industry has predicted the death of the mainframe for many decades now. Maybe even AI won’t kill it.
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Tech
Facebook launches a dedicated Marketplace app for sellers, adds a free verification system
Facebook is rolling out updates today in a bid to increase engagement and make the platform more organized for its users. In the offing are new apps for sellers on Marketplace; a verification system to prove you are human on services like Dating, Marketplace, and Groups; and a new immersive design for video.
Facebook Marketplace sees more than 430 million monthly listings, and with more than 1.1 billion active users, it is a big reason younger folks still use the platform.
To keep this momentum going, Facebook is launching a separate app for people who list and sell items on the platform frequently. Dubbed “Seller,” the app lets sellers manage their listings, message buyers, and track the performance of items.
Facebook is also rolling out a free verification system called Facebook Verified — not to be confused with Meta Verified, which lets you subscribe for a verification mark and other features.
The new system lets people take a selfie to verify their authenticity as a real user, and then the verification mark will show up on their profile across Facebook Dating, Marketplace, and Groups. The verified mark looks like a check mark within a white circle, unlike the blue badge you can get by paying for Meta Verified.
The company said it is also testing an optional, immersive, full-screen video view for the Facebook app that pops up as soon as you open it. This update will initially be rolled out to “video-heavy” international markets, and make its way to the U.S. next year.
Facebook said users can turn off this UI to go back to the feed-based interface. The company has tested a similar update with Instagram in several markets.
New app releases are turning into a routine course of action for Meta, which has ramped up its app development to engage different sets of users. In May, it debuted a Reddit-like app for Facebook Groups called Forum, and this month it released a vibe-coding app called Pocket.
The company said it plans to add AI to the app to help users automate tasks such as writing descriptions of items they want to put up for sale, or search through groups to answer questions.
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Tech
OpenAI’s new voice mode makes it to the ChatGPT desktop app
OpenAI on Thursday said it has updated its ChatGPT desktop app to add support for ChatGPT Voice, allowing users to talk to the app to control AI agents and perform tasks on their computer.
The new feature taps OpenAI’s new family of voice models called ChatGPT-Live, which it launched earlier this month.
OpenAI said ChatGPT Voice works with both ChatGPT Work and Codex, and can also tap computer use skills to look up websites and apps. Plus, on macOS, with Appshots, users can let the app access what’s on their screen, including alt-text.
At launch, ChatGPT Voice’s smartphone version featured smoother conversations, with better interruption handling, but it was not built to take action on smartphones.
Thursday’s desktop update is more capable, allowing users to dictate complex commands involving many steps, and respond when ChatGPT needs their input.
In a demo video, OpenAI showed a developer asking ChatGPT to create a new thread, make a pull request, and find the root cause for a bug, with one command.
The company said that users can utilize ChatGPT Voice in Codex from the iOS app through remote access.
Anthropic has also updated its voice mode for Claude, which can tap the company’s Opus, Sonnet, and Haiku models to complete tasks in apps like Gmail, Calendar, Slack, Notion, and Canva.
Tech
Midjourney acquired the astrology app Co-Star
Midjourney, an AI lab best known for its LLM-powered image and video generators, has acquired the social astrology app Co-Star, according to Bloomberg. The deal terms were not disclosed.
Co-Star, which reportedly has about 4.3 million monthly active users, is mostly used to help people determine their astrological birth charts, which they can then share with other friends on the app. Co-Star uses both AI and humans to write horoscopes, compatibility assessments, and other advice based on a user’s astrological information.
Midjourney seems to be casting a wide net when it comes its product lineup. The company seems almost synonymous with the Discord server where users can generate text and images — there is no stand-alone Midjourney app — yet the AI lab is also trying to build a medical arm and spa. Why not throw an astrology app in the mix?
Co-Star’s team of two dozen employees has joined Midjourney as part of the acquisition. Given the team’s experience in building consumer apps, Midjourney could perhaps finally get its own stand-alone app.
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