IBM shares rise after earnings top estimates in ‘uncertain, volatile’ economy

IBM
CEO
Arvind
Krishna
speaks
during
the
Business
20
(B-20)
Summit
in
New
Delhi
on
Aug.
25,
2023.

Prakash
Singh
|
Bloomberg
|
Getty
Images

IBM
shares
rose
as
much
as
8%
in
extended
trading
Wednesday
after
the
tech
and
services
provider
announced
fourth-quarter
results
that
exceeded
Wall
Street’s
expectations.

Here’s
how
the
company
did,
compared
to
the
consensus
among
analysts
surveyed
by
LSEG,
formerly
known
as
Refinitiv:

Earnings
per
share:
$3.87,
adjusted
vs.
$3.78
expected.
Revenue:
$17.38
billion
vs.
$17.30
billion
expected.

IBM’s
revenue
increased
4%
year
over
year
in
the
quarter,
according
to
a

statement.
Net
income,
at
$3.29
billion,
or
$3.55
per
share,
increased
from
$2.71
billion,
or
$2.96
per
share,
in
the
year-ago
quarter.
The
company
confronted
“a
very
challenging,
uncertain,
volatile
macroeconomic
environment,”
Chief
Financial
Officer
James
Kavanaugh
said
in
an
interview
with
CNBC.

Free
cash
flow
for
the
year
totaled
$11.2
billion,
more
than
the
$10.5
billion
management
had
called
for.
The
company’s
fourth-quarter
gross
margin,
at
59.1%,
was
the
widest
since
1999.
Real
estate
reductions
resulted
in
lower
quarterly
capital
expenditures,
Kavanaugh
said
on
a
conference
call
with
analysts.

IBM
said
software
revenue
came
to
$7.51
billion,
up
3%
but
less
than
the
$7.67
billion
consensus
among
analysts
surveyed
by
StreetAccount.

Consulting
revenue,
at
$5.05
billion,
grew
about
6%
and
ended
up
less
than
the
$5.12
StreetAccount
consensus.

Revenue
from
infrastructure,
such
as
mainframe
computers,
totaled
$4.60
billion,
up
around
3%.
The
StreetAccount
consensus
was
$4.28
billion.
The
distributed
infrastructure
category
in
particular,
containing
servers
with
IBM’s
Power
chips,
accelerated
to
8%
growth,
compared
to
a
decline
of
4%
in
the
third
quarter.

During
the
quarter,
IBM
introduced
a
$500
million

venture
fund
targeting
enterprise
artificial
intelligence
startups,
and
it

announced
plans
to
pay
2.13
billion
euros,
or
$2.32
billion
at
the
current
exchange
rate,
for
StreamSets
and
webMethods,
two
businesses
majority-owned
by
Software
AG.

The
book
of
business
for
generative
AI
and
Watsonx
products
was
double
the
size
it
was
in
the
third
quarter,
when
it
was
in
the
low
hundreds
of
millions,
IBM
CEO
Arvind
Krishna
said
on
the
conference
call.
The
number
includes
consulting
signings
and
software
commitments.

With
respect
to
guidance,
IBM
said
it
sees
$12
billion
in
2024
free
cash
flow
and
revenue
growth
in
the
mid-single
digits
at
constant
currency.
“As
we
start
the
year,
I
think
it’s
prudent
to
assume
the
low
end
of
that
model,”
Kavanaugh
said
on
the
conference
call.

Productivity
gains
will
result
in
workforce
rebalancing
consistent
with
what
played
out
in
2023,
Kavanaugh
said
on
the
call.

Notwithstanding
the
after-hours
move,
IBM
shares
are
up
about
7%
so
far
in
2024,
while
the
S&P
500
U.S.
stock
index
has
gained
2%
during
the
same
period.