IBM Exceeds Expectations, Reports 4.6% Revenue Growth in Q3, Boosting Shares
IBM, the technology conglomerate, has announced its third-quarter results, surpassing Wall Street estimates and resulting in a 1% rise in shares during after-hours trading. The company’s overall revenue grew by 4.6% year over year, or 3.5% at constant currency. Net income reached $1.70 billion, or $1.84 per share, compared to a net loss of $3.20 billion, or $3.54 per share, in the same quarter last year. It’s worth noting that the year-ago quarter’s results were negatively impacted by a $5.9 billion pension settlement charge.
IBM’s Software unit demonstrated strong performance, generating $6.27 billion in revenue, an increase of approximately 8% and in line with analysts’ consensus. The Consulting division also showed growth, reporting $4.96 billion in revenue, up around 6%. However, this fell slightly below StreetAccount’s consensus of $5.11 billion. The decline in revenue from communications, media, and technology clients, which was down 12% in the August quarter, contributed to the marginally lower-than-expected results in the Consulting division.
Jim Kavanaugh, IBM’s finance chief, expressed confidence in the company’s performance in the consulting sector, stating that they were still executing extremely well compared to other consulting providers. He acknowledged that clients’ continued focus on cost reduction had put pressure on discretionary consulting projects, contributing to the slightly underwhelming outcome. Kavanaugh also noted that the stronger U.S. dollar position compared to 90 days ago had affected results.
IBM’s Infrastructure division, inclusive of its mainframe computers, recorded revenue of $3.27 billion, which was a 2% decline but exceeded the StreetAccount consensus of $3.10 billion.
In terms of guidance for the full year, IBM reaffirmed its expectations of revenue growth at constant currency between 3% and 5%, as well as $10.5 billion in free cash flow. For the first nine months of the year, the company has generated $5.12 billion in free cash flow.
During the quarter, IBM made significant strides in the field of artificial intelligence (AI). It released Granite generative AI models for composing and summarizing text, demonstrating its commitment to advancing AI capabilities. Additionally, IBM announced its support for AI startup Hugging Face and acquired Apptio, a cloud cost management tool seller, from Vista Equity Partners for $4.6 billion.
This year, IBM shares have experienced a decline of approximately 2%, trailing behind the S&P 500 index, which has grown around 9% during the same period.
Executives will discuss the company’s Q3 results with analysts on a scheduled conference call at 5 p.m. ET.
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