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IBM CEO Arvind Krishna speaks during the Business 20 (B-20) summit in New Delhi on August 25, 2023.
Prakash Singh Bloomberg | getty images
IBM Shares rose 8% in extended trading Wednesday after the tech and services provider announced fourth-quarter results that beat Wall Street expectations.
The company outperformed the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:
- earnings per share: $3.87, adjusted vs. $3.78 expected.
- Income: $17.38 billion vs. $17.30 billion expected.
IBM’s revenue increased 4% from $16.69 billion in the year-ago quarter, according to a statement. Net income, $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 faced “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 sought by management. The company’s fourth-quarter gross margin was 59.1%, its highest since 1999. On a conference call with analysts, Kavanaugh said quarterly capital spending decreased as a result of real estate cuts.
IBM said software revenue rose 3% to $7.51 billion, but below the consensus of $7.67 billion among analysts surveyed by StreetAccount.
Advisory revenue, $5.05 billion, rose nearly 6% and missed the $5.12 StreetAccount consensus.
Revenue from infrastructure, such as mainframe computers, totaled $4.60 billion, up about 3%. The StreetAccount consensus was $4.28 billion. In particular the distributed infrastructure category, which includes servers with IBM’s Power chips, reached 8% growth compared to a 4% decline in the third quarter.
During the quarter, IBM launched a $500 million venture fund targeting enterprise artificial intelligence startups, and it paid 2.13 billion euros, or $2.32 billion at current exchange rates, for Streamsets and WebMethods, two businesses majority owned by Software AG. Announced plans to.
As for guidance, IBM said it sees free cash flow of $12 billion in 2024 and revenue growth in the mid-single digits at constant currency. “As we start the year, I think it makes sense to assume the lower end of that model,” Kavanaugh said on a conference call.
Kavanaugh said on the call that increased productivity would result in a rebalancing of the workforce that occurred in 2023.
Despite the after-hours move, IBM shares have gained about 7% so far in 2024, while the S&P 500 US stock index has gained 2% during the same period.
— CNBC’s Christina Partsinevelos contributed to this report.
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