IBM reports solid first full quarter as a ‘more focused’ business

20 Apr 2022

Image: © JHVEPhoto/Stock.adobe.com

This is the first full quarter since IBM spun off its IT infrastructure business as Kyndryl.

IBM reported solid revenue growth for the first quarter of 2022, with significant growth in its hybrid cloud and consulting units.

The 110-year-old technology giant reported revenue of $14.2bn, an increase of roughly 8pc compared to the same period last year, while earnings per share for the period were $1.40. These results exceeded analyst expectations and caused IBM’s share price to rise by 3pc yesterday (19 April), CNBC reported.

Future Human

This was the first full quarter since IBM spun off its IT infrastructure business as Kyndryl. The move was first announced in 2020 as a way for the company to focus on AI and cloud, and the split was completed last November.

The company’s new outlook generated positive results at the end of 2021, when IBM sales were reportedly at their highest in at least 10 years, driven by hybrid cloud adoption increasing software and consulting revenue.

“Demand for hybrid cloud and AI drove growth in both software and consulting in the first quarter,” IBM chair and CEO Arvind Krishna said in the company’s latest earnings report.

“Today we’re a more focused business and our results reflect the execution of our strategy. We are off to a solid start for the year, and we now see revenue growth for 2022 at the high end of our model.”

Software revenue was up 12.3pc to $5.8bn in the first quarter of the year, while consulting revenue rose by 13.3pc to $4.8bn.

Within the software segment, Red Hat (which IBM acquired for $34bn in 2018) continued to show impressive growth, with revenue up 18pc for its open-source software services. Hybrid cloud revenue saw an increase of 22pc.

The technology giant ended the first quarter with $10.8bn cash on hand, which marks an increase of $3.2bn from the end of 2021. IBM said it returned $1.5bn to shareholders in dividends during the first quarter.

Following these results, IBM expects “constant currency revenue growth” at the higher end of the mid-single digit range. The positive outlook for the year ahead could mark a new direction for a company that saw negative or low revenue growth for almost a decade.

“We are a faster growing, more profitable company with a higher-value business mix, a significant recurring revenue base and strong cash generation,” said IBM senior VP and chief financial officer James Kavanaugh.

One of the issues IBM mentioned in its earnings call was the decision to pull its business out of Russia following the invasion of Ukraine.

“Our business in Russia is not large, but it’s concentrated in high-end infrastructure and software,” Kavanaugh said. “Last year, business in the country contributed about $300m of revenue and about $200m of profit and cash.”

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Leigh Mc Gowran is a journalist with Silicon Republic

editorial@siliconrepublic.com