International Business Machines Corp.’s stock surged more than 8% higher in Wednesday’s extended session after the technology giant topped profit expectations for the latest quarter and called out an uptick in artificial-intelligence demand.
The company posted net income of $ 3.3 billion, or $ 3.55 a share, compared with $ 2.9 billion, or $ 2.96 a share, in the year-earlier period. On an adjusted basis, IBM IBM, -0.01% earned $ 3.87 a share from continuing operatings, whereas analysts were modeling $ 3.79 a share.
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Revenue rose to $ 17.4 billion from $ 16.7 billion, while the FactSet consensus was for $ 17.3 billion. The company saw a 3% increase in software revenue, a 6% bump in consulting revenue, and a 3% uptick in infrastructure revenue.
Within the company’s software segment, which brought in $ 7.5 billion in total revenue, the company saw 8% growth in sales from Red Hat.
“IBM’s strategic realignment, which includes moving away from some of their antiquated business areas, has shifted focus to more technology-driven fields, particularly in AI software,” Global X research analyst May De said in an email. The company’s “shift towards a platform-centric hybrid cloud strategy has been significantly reinforced by the integration of Red Hat OpenShift, which facilitates the management and deployment of applications across diverse computing environments.”
Meanwhile, software revenue classified as tied to data and artificial intelligence rose by 1%.
“Client demand for AI is accelerating and our book of business for WatsonX and generative AI roughly doubled from the third to the fourth quarter,” Chief Executive Arvind Krishna said in an earnings release.
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Looking at the full year, IBM’s management models revenue growth “consistent with its mid-single-digit model” in constant currency, while foreign exchange is expected to impact top-line growth negatively by roughly one percentage point.
IBM is also looking for approximately $ 12 billion in 2024 free cash flow.
Evercore ISI analyst Amit Daryanani called the free-cash-flow forecast “impressive,” as it cleared Wall Street’s $ 11 billion bar. Meanwhile, FactSet expectations called for revenue growth south of 3% in 2024. IBM’s forecast for that metric also looked “well ahead of Street expectations,” he said.