IBM shares rise after earnings top estimates in ‘uncertain, volatile’ economy

IBM shares rose as much as 8% in extended trading Wednesday after the tech and services provider announced fourth-quarter results that exceeded Wall Street’s expectations.

Here’s how the company did, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:

• Earnings per share: $3.87, adjusted vs. $3.78 expected.
• Revenue: $17.38 billion vs. $17.30 billion expected.

IBM’s revenue increased 4% year over year in the quarter, according to a statement. Net income, at $3.29 billion, or $3.55 per share, increased from $2.71 billion, or $2.96 per share, in the year-ago quarter. The company confronted “a very challenging, uncertain, volatile macroeconomic environment,” Chief Financial Officer James Kavanaugh said in an interview with CNBC.

Free cash flow for the year totaled $11.2 billion, more than the $10.5 billion management had called for. The company’s fourth-quarter gross margin, at 59.1%, was the widest since 1999. Real estate reductions resulted in lower quarterly capital expenditures, Kavanaugh said on a conference call with analysts.

IBM said software revenue came to $7.51 billion, up 3% but less than the $7.67 billion consensus among analysts surveyed by StreetAccount.

Consulting revenue, at $5.05 billion, grew about 6% and ended up less than the $5.12 StreetAccount consensus.

Revenue from infrastructure, such as mainframe computers, totaled $4.60 billion, up around 3%. The StreetAccount consensus was $4.28 billion. The distributed infrastructure category in particular, containing servers with IBM’s Power chips, accelerated to 8% growth, compared to a decline of 4% in the third quarter.

During the quarter, IBM introduced a $500 million venture fund targeting enterprise artificial intelligence startups, and it announced plans to pay 2.13 billion euros, or $2.32 billion at the current exchange rate, for StreamSets and webMethods, two businesses majority-owned by Software AG.

The book of business for generative AI and Watsonx products was double the size it was in the third quarter, when it was in the low hundreds of millions, IBM CEO Arvind Krishna said on the conference call. The number includes consulting signings and software commitments.

With respect to guidance, IBM said it sees $12 billion in 2024 free cash flow and revenue growth in the mid-single digits at constant currency. “As we start the year, I think it’s prudent to assume the low end of that model,” Kavanaugh said on the conference call.

Productivity gains will result in workforce rebalancing consistent with what played out in 2023, Kavanaugh said on the call.

Notwithstanding the after-hours move, IBM shares are up about 7% so far in 2024, while the S&P 500 U.S. stock index has gained 2% during the same period.

— CNBC’s Kristina Partsinevelos contributed to this report.

This is breaking news. Please check back for updates.

WATCH: IBM CEO Arvind Krishna: Most excited for integrating AI into coding