AI business has doubled, IBM expects annual revenue growth to exceed expectations
The growth of data and AI software revenue by 1% is seen as a significant signal of transformation.
Benefiting from the strong demand for AI and impressive financial performance, IBM's stock rose more than 8% after the market closed, reaching $188.2.
IBM Stock Price
After the market closed on Wednesday Eastern Time, IBM released its fourth-quarter earnings report. The data showed that the company's fourth-quarter revenue was $17.4 billion, a year-on-year increase of approximately 4.1%, surpassing the market expectation of $17.3 billion according to FactSet's survey. The net profit was $3.3 billion, a year-on-year increase of approximately 13.7%.
The adjusted EPS was $3.87, exceeding analysts' expectations of $3.79.
In terms of performance by business segment, IBM's most important revenue-generating division, the Software division, contributed $7.5 billion in revenue in the fourth quarter. It is worth noting that Red Hat, which was previously acquired by IBM, contributed nearly 8% of the sales revenue.
IBM's data and AI software revenue grew by 1%, which is seen as an important signal of transformation. IBM's CEO, Arvind Krishna, stated at the earnings conference, "Due to strong customer demand for artificial intelligence, our business volume in the company's latest AI and data platform, Watson X, and generative AI has doubled compared to the third quarter."
May De, a research analyst at asset management company Global X, pointed out in an email that IBM is undergoing a strategic transformation, shifting from the old business model to more technology-driven areas, especially in the AI software field. IBM has strengthened its capabilities in the field of cloud computing by integrating Red Hat OpenShift, which helps manage and deploy applications in different computing environments (OpenShift is an open-source container application platform that supports enterprises in managing and deploying applications in various cloud and physical environments).
Looking ahead to 2024, IBM's management expects the annual revenue growth rate in 2024 to be between 4% and 6% excluding the impact of exchange rate fluctuations, surpassing FactSet's expectation of 3%. Actual foreign exchange fluctuations may have a negative impact of 1% on total revenue. The annual free cash flow target is $12 billion, far exceeding Wall Street's expectation of $11 billion.