IBM’s results for the third quarter did not match analysts’ expectations, but this is a pleasant case when reality turned out to be better than expectations.
The value of IBM shares last Wednesday, October 25, during extended trading showed an increase of 1%.The positive dynamic of this indicator was recorded against the background of the publication by the mentioned company of the results of its activities for the third quarter of this year. Last quarter turned out to be more positive for IBM than initially expected. Financial indicators for the mentioned period exceeded analysts’ expectations.
According to the results of the third quarter of this year, IBM’s earnings per share was fixed at $2.20. At the same time, analysts predicted that this figure would be $2.13.
The company’s revenue for the third quarter of 2023 amounted to $ 14.75 billion. Analysts predicted that this IBM figure would be equal to $14.73 billion.
The company’s total revenue for the last quarter showed an increase of 4.6% year-on-year or 3.5% in constant currency terms. IBM’s net profit for this period was fixed at $1.7 billion or $1.84 per share. This is significant progress and a full-fledged success against the background of the fact that in the third quarter of last year, the company recorded a net loss of $3.2 billion or $3.54 per share. According to experts, in 2022, a negative factor affecting IBM’s financial performance was the cost of paying pensions in the amount of $5.9 billion.
The revenue of the software unit of the company was fixed at $6.27 billion at the end of the last quarter. This figure is about 8% higher than the result for the same period last year. Also, the revenue of the software unit of the company is in line with the consensus forecast of analysts who were interviewed by StreetAccount.
IBM’s consulting arm demonstrated the dynamics of financial performance growth in the last quarter. The revenue of this unit for the mentioned period was fixed at the level of $ 4.96 billion. This figure is about 6% higher than the result of a year ago. At the same time, the StreetAccount forecast provided for consulting revenue at the level of $ 5.11 billion.
In September, Accenture reported that IBM’s revenue from customers in sphere communications, media, and technology decreased by 12% in the August quarter.
Jim Kavanaugh, the company’s chief financial officer, said during a conversation with media representatives that, in his opinion, the firm is still doing very well in consulting. He noted that IBM currently occupies a certain market share of the relevant services. The company has a high level of competitiveness compared to the capabilities of other firms of the corresponding profile. IBM’s share in the consulting services market exceeds the scale of the presence of many other players in this space.
Jim Kavanaugh also said that customers are still interested in ways to reduce their costs. According to him, this trend is a factor of pressure on discretionary consulting projects. Commenting on the results of the activity of the corresponding IBM unit for the last quarter, he noted that the recorded indicators are a little unexpected, mentioning in this context that the current dollar state is stronger compared to those positions that were observed 90 days ago.
Infrastructure unit revenue, including company mainframes, was fixed at $3.27 billion at the end of the last quarter. This indicator decreased by 2% year-on-year. At the same time, the unit infrastructure’s revenue exceeds StreetAccount’s consensus forecast of $3.1 billion.
The company’s management confirmed the forecast of annual revenue growth from 3% to 5% with the currency unchanged. A free cash flow of $10.5 billion is also expected, which amounted to $5.12 billion in the first nine months of this year.
Jim Kavanaugh, during a conference call with analysts, said that the company expects positive results for the fourth quarter, taking into account seasonal fluctuations.
Last quarter, IBM released Granite generative artificial intelligence configurations for composing and summarizing text. The company also began providing support to the AI startup Face and bought Apptio, a seller of tools for managing cloud costs, for $4.6 billion.
IBM CEO Arvind Krishna, during a conference call, says that the profit and loss report for the third quarter is closely related to generative artificial intelligence, which is estimated at hundreds of millions of dollars.
As we have reported earlier, IBM Launches New Version of WatsonX AI Platform.