IBM ( IBM ) reported a 4% increase in revenue last quarter, driven in part by demand for its AI products and services, as well as hybrid cloud. The computing giant also said that free cash flow will improve this year.
“We’re seeing very good overall demand growth,” IBM CFO James Cavanaugh said in an interview with Yahoo Finance. “We have thousands of clients that we’re interacting with. Our use cases and pilots have grown almost fivefold.
IBM’s earnings per share of $3.87 beat Wall Street’s average of $3.76, and revenue of $17.4 billion topped forecasts of $17.29 billion for the fourth quarter.
Of particular interest to analysts and investors is the company’s free cash flow, which IBM predicts will increase to about $12 billion this year from $11.2 billion in 2023. Revenue will increase by a mid-single-digit percentage, with software trending slightly above that and Kavanaugh said consulting is expected to expand 6% to 8%.
IBM’s biggest growth last quarter came in its consulting business, where sales rose 5.8% to $5.0 billion, though this was below some analysts’ estimates. Its weakest point was security within its software business, which contracted by 5%.
“In the fourth quarter, we grew revenue across all of our segments, driven by continued adoption of our hybrid cloud and AI offerings,” IBM CEO Arvind Krishna said in a statement. “Client demand for AI is accelerating and our book business for Watsons and Generative AI nearly doubled from the third quarter to the fourth quarter.”
Kavanaugh said IBM’s creative AI offerings are being used by clients to increase coding productivity, boost call center business, and increase digital labor effectiveness in financial operations and elsewhere. But he stressed it was still early.
“We’re moving from the experiences of the last few years to clients that are now at scale,” he said. “I think this curve is going to be a long curve. I think gen AI is going to deliver a lot of value. The revenue realization ramp will start to scale in ’24, and then you’ll start to scale in ’25 and beyond.” There will be some inflection points as the growth progresses.
After years of being range-bound, IBM stock has broken out, rising nearly 24 percent in the past 12 months to a nearly 10-year high.
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