IBM CEO Arvind Krishna addresses a panel discussion at the World Economic Forum in Davos, Switzerland, January 17, 2023.
Stefan Wermuth | Bloomberg | Getty Images
IBM on Wednesday reported quarterly revenue that beat analysts’ estimates, on the back of better-than-expected growth in the company’s software and infrastructure segments. Here’s how the company did it:
- Merits: $3.60 per share, adjusted, versus $3.60 per share as expected by analysts, according to Refinitiv.
- Revenue: $16.69 billion versus $16.4 billion expected by analysts, according to Refinitiv.
Analysts had expected IBM’s overall revenue to fall for the first time in two years, but it was flat, according to a statement. Net income rose 16% to $2.71 billion.
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The company plans to cut about 3,900 jobs, equivalent to 1.5% of IBM’s workforce, CNBC confirmed. Bloomberg previously reported on the cuts, citing comments from CFO Jim Kavanaugh. IBM also said it expects to record a $300 million charge in the first quarter related to the spin-off of Kyndryl, its managed infrastructure business, and the sale of its Watson healthcare unit last year.
IBM’s software segment posted $7.29 billion, up nearly 3% and ahead of the consensus of $7.12 billion among analysts polled by StreetAccount.
The company generated $4.77 billion in consulting revenue, up 0.5% and slightly below StreetAccount’s $4.8 billion expectation.
IBM’s infrastructure segment generated $4.48 billion, up nearly 2% and ahead of the StreetAccount consensus of $4.18 billion. Revenue from IBM’s Z Systems line of mainframe computers rose 16% after the Z16 model became generally available last May.
Referring to the guidance, IBM called for 2023 currency-neutral revenue growth and free cash flow of around $10.5 billion. In 2021, IBM announced a goal of achieving free cash flow of $35 billion between 2022 and 2024, and in 2022 free cash flow totaled $9.29 billion.
During the quarter, IBM unveiled a plan to invest $20 billion in New York’s Hudson Valley over the course of a decade. The company also announced a next-generation 433-qubit quantum computer and the acquisition of Octo, one of the few consulting firms IBM has acquired since Kyndryl spun off in 2021.
IBM outperformed its technology peers in 2022, its worst year for the Nasdaq since 2008. IBM is up 11% over the past year and was one of only two U.S. tech companies valued at $50 billion or more to report earnings. The other was VMware, which agreed to be acquired by Broadcom for $61 billion in May.
Executives will discuss the results with analysts in a conference call starting at 5:00 p.m. ET.
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