IBM revealed its quarterly sales that were above analysts' projections, thanks to stronger-than-anticipated growth in the company's software and infrastructure businesses.
Sales Prediction
Announced on Wednesday, Jan. 25, the company's performance is as follows, according to CNBC:
Earnings: Adjusted profit per share of $3.60, matching the $3.60 forecast by analysts. Revenue: In comparison to the $16.4 billion predicted by experts, sales came in at $16.69 billion.
In a statement by IBM, the company's overall revenue was steady, despite predictions that it would drop for the first time in two years. Income after tax increased by 16% to $2.71 billion.
Even though Microsoft reported a dip in December 2022 for new business on Tuesday, Jan. 24, IBM CEO Arvind Krishna denied noticing a similar trend.
Software at IBM brought in $7.29 billion, up by nearly 3% year-over-year and better than the $7.12 billion projected by analysts. Revenue from consulting amounted to $4.77 billion, up 0.5% year-over-year but falling short of the $4.8 billion. Both reports came from StreetAccount.
The $4.48 billion produced by IBM's infrastructure division was about 2% more than the $4.18 billion StreetAccount average. With the release of the Z16 in May of last year, IBM saw a 16% increase in sales of its Z Systems line of mainframe computers.
IBM predicted constant currency revenue growth of mid-single digits for 2023, with chief financial officer Jim Kavanaugh saying on a conference call that the company should be expected to be on the low end of its model for mid-single-digit revenue growth.
The company also predicted a free cash flow of around $10.5 billion. IBM projected $35 billion in free cash flow for the years 2022 to 2024 in a 2021 press release. It actually generated $9.29 billion in free cash flow that year.
Kavanaugh estimated that the company's pre-tax profits would increase by more than $200 million due to the decision to extend the lifespan of servers and networking equipment beginning on Jan. 1.
Staff use vacuum-cleaners to clean the floor at the IBM stand at the CEBIT trade fair on March 1, 2008. The world's biggest high-tech fair will be inaugurated on March 03 by German Chancellor Angela Merkel and French President Nicolas Sarkozy, as France is this year's partner country. The fair officially runs from March 04 to 09 and will draw some 5,000 exhibitors.
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Layoff Plan
Meanwhile, CNBC verified the company's intentions to lay off 1.5% of its employees, or around 3,900 people.
The reductions were first reported by Bloomberg. IBM said it would take a $300 million charge in the first quarter due to the separation of its managed infrastructure subsidiary Kyndryl and the sale of its Watson healthcare unit in the previous year.
During the quarter, IBM said it would spend $20 billion in the Hudson Valley region of New York over the next decade. In addition, IBM has acquired Octo, one of many consulting firms it has bought up since spinning out Kyndryl in 2021. Plus, it unveiled a new generation of quantum computers with 433 qubits.
IBM outscored tech rivals in 2022, the Nasdaq's weakest year since 2008. IBM was one of two US tech businesses worth $50 billion or more to rise 11% last year.
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