IBM (NYSE:IBM) reported a 4% increase in revenue in the last quarter, attributing the growth to strong demand for its AI products and services, along with the adoption of hybrid cloud solutions. The computing giant’s positive financial performance led to a notable surge in its stock, rising by 11.5% by mid-morning on Thursday.
IBM’s CFO, James Kavanaugh, shared insights in an interview with Yahoo Finance, highlighting the notable increase in demand for generative AI offerings. Kavanaugh mentioned that the company has engaged with thousands of clients, with use cases and pilots experiencing a fivefold increase. The positive outcome exceeded Wall Street estimates, with IBM reporting earnings per share of $3.87, beating the projected $3.76, and revenue reaching $17.4 billion, surpassing the forecasted $17.29 billion for the fourth quarter.
Of particular interest to analysts and investors is IBM’s free cash flow, which the company anticipates will improve to around $12 billion in the current year, up from $11.2 billion in 2023. IBM forecasts a mid-single-digit percentage increase in revenue, with software trending slightly above that, and consulting expected to expand by 6% to 8%.
IBM’s consulting business experienced the most significant growth in the last quarter, with sales rising by 5.8% to $5.0 billion, although it fell slightly short of some analysts’ expectations. On the flip side, security within its software business contracted by 5%.
CEO Arvind Krishna highlighted the positive impact of continued adoption of hybrid cloud and AI offerings, stating, “Client demand for AI is accelerating, and our book of business for watsonx and generative AI roughly doubled from the third to the fourth quarter.”
Kavanaugh emphasized the early-stage deployment of IBM’s generative AI offerings, noting applications in boosting coding productivity, enhancing call center operations, and increasing the efficiency of digital labor in financial operations and other sectors. He anticipates a gradual revenue realization ramp, with scaling expected in 2024 and inflection points in 2025 and beyond.
After years of being range-bound, IBM’s stock has broken out, witnessing a rise of approximately 24% over the past 12 months, reaching an almost 10-year high. The positive momentum reflects investor confidence in IBM’s strategic focus on AI and hybrid cloud solutions.
Featured Image: Unsplash
Author Faith Yakubu 
