IBM issued stronger-than-expected first-quarter earnings on Wednesday even as the technology and consulting company reported disappointing revenue.
Here’s how the company did:
- Earnings: $1.36 per share, adjusted, vs. $1.26 per share as expected by analysts, according to Refinitiv.
- Revenue: $14.25 billion, vs. $14.35 billion as expected by analysts, according to Refinitiv.
IBM’s revenue increased 0.4% from a year earlier in the quarter, according to a statement. Net income rose 26% to $927 million, or $1.02 a share for continuing operations.
Profit rose faster than revenue as IBM’s total expenses and other income declined 4% to $6.45 billion, with reductions coming in research, development and engineering
Net income was about $200 million lower because of various changes in the company’s portfolio. Last year IBM said it was selling health-care data and analytics assets to Francisco Partners.
Revenue in the company’s software segment rose about 3% to $5.92 billion, higher than the $5.83 billion consensus among analysts polled by StreetAccount.
IBM’s consulting unit delivered $4.96 billion in revenue, up almost 3% but lower than the StreetAccount consensus of $5.01 billion.
Sales in the infrastructure segment, which includes IBM’s mainframes, fell 4% to $3.1 billion, trailing the $3.19 billion StreetAccount consensus. Declines came in the distributed infrastructure and infrastructure support categories, even as sales of Z mainframe computer systems increased by 7% following the release in May of the Z16 model.
Gross margins for the software, consulting and infrastructure divisions all widened year over year.
In terms of guidance, IBM called for full-year revenue growth of 3% to 5% in constant currency. Finance chief Jim Kavanaugh said three months ago that, “as we enter this year, I think it’s prudent to expect the low end of the mid-single-digit model.” IBM maintained guidance for $10.5 billion in 2023 free cash flow.
During the quarter, IBM said its technology was powering artificial intelligence-powered commentary on videos in the Masters Tournament golf app. In recent months, following the launch of startup OpenAI’s ChatGPT chatbot, several technology companies have sought to showcase their generative AI capabilities for creating images, text and videos.
The shares rose about 1% in extended trading. Prior to the after-hours move, IBM stock was down about 11% this year, underperforming the S&P 500 index, which has climbed 8% over the same period.
Executives will discuss the results on a conference call with analysts starting at 5 p.m. ET.
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