IBM Finally Sees Revenue Growth After Four Quarters of Declines

Tech giant IBM reported first quarter earnings this week which not only came in better than what analysts had expected but finally showed revenue growth after four quarters of declines.

Shares of the enterprise technology company were rising 4% in extended hours on Monday and closed up with about these gains in Tuesday’s close.

For the first quarter IBM reported earnings per share of $1.77 adjusted. This was compared to the $1.63 that had been expected by analysts per Refinitiv. Revenue at $17.73 billion was also better than the $17.35 billion that was expected, per analysts estimates according to Refinitiv.

Revenue saw a growth of 0.9% on an annualize basis in the quarter. In the previous quarter there had been a 6% decrease.

“I think that the spend environment overall is improving, Matt. I think I can say that, definitely compared to the fourth quarter,” IBM CEO Arvind Krishna said in response to an analyst.

The company’s Global Technology Services segment that handles managed services, outsourcing and support, had generated $6.37 billion in revenue. Its revenue was down 1% year over year, but it was more than the FactSet consensus estimate of $6.32 billion.

The company aims to spin off part of the segment as a standalone public company called Kyndryl by the end of the year.

“This quarter, we saw an improved trajectory in project activity and client-based business volumes including in some of the industries most affected by the pandemic such as retail and consumer products,” said company finance chief Jim Kavanaugh.

The Cloud and Cognitive Software division of the company, which includes Red Hat, generated $5.44 billion in revenue, which was up 4% and above the $5.30 billion FactSet consensus. The company had reported $529 million in capital expenditures in the quarter, down 28%.

The company’s Global Business Services unit contributed $4.23 billion in revenue, which was up 2% and higher than the $4.03 billion consensus.

Systems revenue of $1.43 billion was a growth of 4% and above the $1.29 billion consensus estimate.

“We had traction in areas like financial services where robust market volatility drove demand for increased capacity,” Kavanaugh added.
IBM also announced the acquisitions of two cloud consulting firms in the quarter.

The company is acquiring 7Summits, a Salesforce consulting firm, from private-equity-firm Sverica Capital Management, and Taos, a consulting group that works on cloud migrations.

The company also revealed that it had sold 250 patents to grocery-delivery company Instacart.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.