IBM CEO Arvind Krishna
Source: CNBC
IBM shares rose 3% in extended trading on Tuesday after the technology services company released first-quarter results that beat expectations.
Here’s how the company did it:
- Merits: $1.40 per share, adjusted, versus $1.38 per share as expected by analysts, according to Refinitiv.
- Revenue: $14.2 billion versus $13.85 billion expected by analysts, according to Refinitiv.
Revenue for the period rose 7.7% year over year, IBM said in a statement. This is the company’s first full quarter excluding its managed infrastructure services business, which it spun off into a unit called Kyndryl. Sales to Kyndryl added 5 percentage points to revenue growth for the quarter.
Net income from continuing operations increased 64% year over year to $662 million. Total net income fell 23%.
IBM raised its full-year guidance, calling for currency-neutral revenue growth in the upper-mid single digits, with an additional 3.5 percentage point growth from Kyndryl. In January, executives told analysts they expected mid-single-digit growth without factoring in the impact of Kyndryl or the currency.
In the first quarter, IBM’s software segment generated revenue of $5.77 billion, up 12% and above the consensus of $5.63 billion among analysts polled by StreetAccount.
Consulting revenue grew 13% to $4.83 billion, ahead of the StreetAccount consensus of $4.6 billion.
Infrastructure revenue fell 2% to $3.22 billion as customers prepare for IBM’s next-generation mainframe computers later this year.
Also during the quarter, IBM said Francisco Partners agreed to buy its Watson health data and analytics assets in a deal said to be worth over $1 billion. IBM released updated historical numbers for its high-margin software segment to better reflect its financials excluding those businesses.
Earlier in March, IBM said it had suspended its operations in Russia after the country invaded Ukraine.
“Russia is a very small part of IBM,” Jim Kavanaugh, the company’s chief financial officer, said in an interview Tuesday. The country accounts for 0.5% of total revenue and 2% of profit, he said.
IBM also announced the acquisitions of environmental data analytics software maker Envizi and telecommunications consultancy Sentaca.
IBM stock has outperformed the S&P 500 this year, falling about 3% on Monday, while the broader index is down 6%. With interest rates rising and war in Europe, investors have switched to value stocks in 2022.
Executives will discuss the results with analysts in a conference call starting at 5:00 p.m. ET.
Correction: This message has been updated to accurately reflect IBM’s 2022 guidance.
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