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IBM Posts Strong Earnings Despite Market Challenges
IBM announced its first-quarter earnings on Wednesday, exceeding analysts’ expectations for both earnings and revenue.
Earnings per share: $1.60 adjusted vs. $1.40 expected
Revenue: $14.54 billion vs. $14.4 billion expected
The company’s revenue showed a modest increase of 0.6% from $14.5 billion during the same period last year, as detailed in a press release. However, net income fell to $1.06 billion ($1.12 per share), down from $1.61 billion ($1.72 per share) in the previous year’s first quarter.
Looking ahead to 2025, IBM has reaffirmed its target of generating $13.5 billion in free cash flow and aims for 5% revenue growth at constant currency. For the second quarter, management expects revenues to fall between $16.4 billion and $16.75 billion, with the midpoint of $16.58 billion surpassing the LSEG consensus of $16.33 billion.
IBM CEO Arvind Krishna expressed optimism regarding the company’s future, stating, “We remain bullish on the long-term growth opportunities for technology and the global economy. While the macroeconomic environment is fluid, based on what we know today, we are maintaining our full-year expectations for revenue growth and free cash flow.”
During the first quarter, IBM’s software segment grew by 7%, with revenues reaching $6.34 billion, aligning with analyst projections. The hybrid cloud software category, which includes offerings from Red Hat, grew 12%, a slight decrease from the 16% growth noted in the previous quarter.
IBM’s consulting division generated $5.07 billion in revenue, marking a 2% decrease but slightly exceeding the $5.05 billion forecast.
The infrastructure division, which comprises mainframe products, experienced a 6% decrease in revenue to $2.89 billion, although this figure was above the consensus estimate of $2.76 billion. Earlier this month, IBM unveiled its z17 mainframe, which is designed for the AI era. Typically, revenue growth in this area increases as clients adopt newer generations of technology but declines later in the lifecycle.
IBM also announced significant corporate developments during the quarter, including the settlement of legal disputes with GlobalFoundries and the completion of its $6.4 billion acquisition of HashiCorp. Additionally, IBM has announced intentions to acquire DataStax, enhancing its data storage capabilities for enterprise AI applications.
Amid a broader market sell-off, attributed to economic concerns related to tariffs enacted by President Donald Trump, IBM shares have still seen an 11% increase this year. In contrast, the Nasdaq index has experienced a decline of nearly 14%. However, the stock fell by 5% in after-hours trading following the earnings report.
Company executives are scheduled to discuss the earnings results with analysts during a conference call beginning at 5 p.m. ET.
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