Priya PatelTLDR:
IBM reported better-than-expected quarterly earnings, leading to a 5% increase in its stock price during extended trading. The company reported net income of $3.3 billion, compared to $2.9 billion in the previous year. Adjusted earnings per share were $3.87 compared to analyst expectations of $3.79. IBM also saw a 3% increase in software revenue, driven by an 8% growth in sales from Red Hat. CEO Arvind Krishna highlighted the growing demand for artificial intelligence (AI) and said that the company’s book of business for AI roughly doubled from the third to the fourth quarter. IBM expects revenue growth in line with its mid-single-digit model for the full year.
Key points:
- IBM’s stock price increased 5% after reporting better-than-expected quarterly earnings.
- Net income rose from $2.9 billion to $3.3 billion, while adjusted earnings per share were $3.87.
- The company saw a 3% increase in software revenue, driven by an 8% growth in sales from Red Hat.
- CEO Arvind Krishna highlighted the growing demand for AI and said that the company’s book of business for AI roughly doubled from the third to the fourth quarter.
- IBM expects revenue growth in line with its mid-single-digit model for the full year.
IBM’s ‘accelerating’ AI demand helps power stock higher after earnings
IBM shares rose approximately 5% following the release of its quarterly earnings, which beat expectations. The company reported net income of $3.3 billion, an increase from $2.9 billion in the previous year. Adjusted earnings per share were $3.87, exceeding the consensus estimate of $3.79. Revenue also surpassed expectations, rising to $17.4 billion from $16.7 billion. IBM experienced growth in its software, consulting, and infrastructure revenue. Within the software segment, the company saw an 8% increase in sales from Red Hat. IBM attributes its strong performance to the growing demand for artificial intelligence (AI). The company stated that client demand for AI is accelerating, with its book of business for WatsonX and generative AI doubling from the third to the fourth quarter.
IBM has been undergoing a strategic realignment, moving away from obsolete business areas and focusing on technology-driven fields. This includes a shift towards a platform-centric hybrid cloud strategy and the integration of Red Hat OpenShift, which facilitates the management and deployment of applications across various computing environments. The company’s strong earnings report, along with its forecast for revenue growth in line with its mid-single-digit model, has boosted investor confidence. IBM expects to generate approximately $12 billion in free cash flow by 2024, surpassing Wall Street’s expectations of $11 billion. The company’s positive outlook has positioned it well for future growth in the AI and technology sectors.
