IBM’s Software unit delivered $6.27 billion in revenue registering an 8% surge in Q3 2023. The company has given an optimistic outlook for Q4 as well.
On Wednesday, October 25, IBM Corp (NYSE: IBM) stock jumped by 1% as the technology firm announced its Q3 2023 results beating Wall Street estimates. IBM’s total revenue experienced a year-over-year growth of 4.6% in the quarter, or 3.5% when adjusted for constant currency fluctuations, as reported in an official statement.
The net income for the period reached $1.70 billion, equivalent to $1.84 per share. This is a significant improvement compared to the net loss of $3.20 billion, or $3.54 per share, reported in the corresponding quarter one year ago. The net loss in the prior year’s quarter was primarily due to a $5.9 billion pension settlement charge.
IBM’s Software unit delivered $6.27 billion in revenue, reflecting an approximate 8% increase. This aligned with the consensus of $6.27 billion among analysts surveyed by StreetAccount.
On the other hand, IBM’s Consulting division achieved $4.96 billion in revenue in Q3 2023, marking a growth of around 6%, though falling short of StreetAccount’s consensus, which had projected revenue of $5.11 billion. Accenture reported a 12% decline in revenue from communications, media, and technology clients in the August quarter of the previous month. Speaking on the development, Jim Kavanaugh, IBM’s finance chief, told CNBC’s Kristina Partsinevelos said:
“We still are executing extremely well from my point of view in consulting. I mean, if you look at the overall market, I think we’re taking share when you look at it against other consulting providers.”
However, clients continue to prioritize cost reduction, creating challenges for discretionary consulting projects, according to Kavanaugh. “The consulting results fell slightly short because we are grappling with a significantly stronger US dollar position compared to where we stood 90 days ago,” noted he.
IBM Issues Guidance for the Full Year
The management reaffirmed their full-year guidance, which includes anticipated revenue growth at constant currency ranging from 3% to 5%, along with expectations of $10.5 billion in free cash flow. So far this year, the company has already generated $5.12 billion in free cash flow.
On a conference call with analysts, Kavanaugh mentioned:
“While, as always, we are depending on a seasonally robust fourth quarter, we are well-positioned to reach the approximately $10.5 billion target for the year.”
During the quarter, IBM introduced Granite, a set of generative artificial intelligence models designed for text composition and summarization. Additionally, the company announced its support for the AI startup Hugging Face and completed the acquisition of Apptio, a provider of tools for cloud cost management, from Vista Equity Partners for $4.6 billion.
“Our book of business in the third quarter specifically related to generative AI both in the low hundreds of millions of dollars,” said IBM CEO Arvind Krishna.
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