International Business Machines Corp. stock rose more than 8% in Wednesday's extended session after the tech giant beat earnings expectations for the fourth quarter and called for an uptick in demand for artificial intelligence.
The company recorded net income of $3.3 billion, or $3.55 per share, compared to $2.9 billion, or $2.96 per share, in the corresponding period last year. On a rate basis, IBM IBM,
It earned $3.87 per share from continuing operations, while analysts were expecting $3.79 per share.
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Revenue rose to $17.4 billion from $16.7 billion, while the FactSet consensus was $17.3 billion. The company saw a 3% increase in software revenue, a 6% increase in consulting revenue, and a 3% increase in infrastructure revenue.
Within the company's software segment, which generated $7.5 billion in total revenue, the company saw 8% growth in Red Hat sales.
“IBM’s strategic realignment, which includes moving away from some of its legacy business areas, has shifted focus to more technology-driven areas, particularly in artificial intelligence software,” May Dee, a Global X research analyst, said in an email. . The company's shift toward a platform-centric hybrid cloud strategy has been greatly enhanced by the integration of Red Hat OpenShift, which makes it easier to manage and deploy applications across diverse computing environments.
Meanwhile, software revenues classified as data and AI-related rose 1%.
“Customer demand for AI is accelerating and our track record for WatsonX and generative AI nearly doubled from Q3 to Q4,” CEO Arvind Krishna said in an earnings release.
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Looking at the full year, IBM's management is modeling revenue growth “consistent with its mid-single-digit model” in constant currency, while foreign currency exchange is expected to negatively impact revenue growth by about one percentage point.
IBM is also looking at nearly $12 billion in free cash flow for 2024.
Evercore ISI analyst Amit Daryanani called the free cash flow forecast “impressive,” surpassing Wall Street's $11 billion mark. Meanwhile, FactSet forecasts called for revenue growth south of 3% in 2024. IBM's forecast for that metric also appears to be “far ahead of the Street's expectations,” he said.
