IBM (IBM) late Tuesday reported first-quarter results that beat estimates for revenue and earnings as the tech giant made further progress on its massive restructuring. IBM stock rose on the news.
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The company reported adjusted earnings of $1.40 per share on sales of $14.2 billion. Analysts had expected IBM to report earnings of $1.38 per share on sales of $13.85 billion.
IBM shares rose 2.4% to 132.25 during after-hours trading today.
Revenue increased 8% over the prior-year period, or 11% in constant currency.
Move to a hybrid cloud platform
IBM continues to undergo a significant multi-year restructuring. In addition to artificial intelligence, the focus is on an open, hybrid cloud computing platform.
A hybrid cloud architecture means that IBM can offer its customers both a public cloud and a private cloud. Among the leading providers in the public cloud space Amazon (AMZN) and Microsoft (MSFT).
“Demand for hybrid cloud and AI drove growth in both software and consulting during the first quarter,” said Arvind Krishna, IBM chairman and chief executive, in a written statement accompanying IBM’s earnings release. “Today we are a more focused company and our results reflect the execution of our strategy. We’ve had a solid start to the year and now see revenue growth for 2022 at the high end of our model.”
Hybrid cloud revenue surpassed $5 billion in the first quarter, up 14%. IBM’s software group posted revenue of $5.8 billion, up 12%. Red Hat revenue increased 18%
The company now expects currency-neutral revenue growth in the upper end of the mid-single-digit range, IBM said. It expects an additional 3.5 point contribution from incremental sales to Kyndryl.
IBM shares hit by business shifts
The big changes in business operations help explain why IBM’s revenue and earnings growth has been a struggle.
“Having already fallen behind in the public cloud, IBM is investing heavily in the so-called hybrid cloud,” said Daniel Morgan, senior portfolio manager at Synovus Trust, in a note to clients.
“The opportunity for hybrid cloud is significantly greater as older businesses are just starting to move more of their workloads to the cloud while internal IT systems upgrades take place,” Morgan said.
IBM has committed to $20 billion in mergers and acquisitions through 2024, with a focus on software.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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