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International Business Machines Inc. shares rose about 5% in extended trading Wednesday after the technology giant beat profit estimates for its latest quarter and cited rising demand for artificial intelligence.
The company’s net income was $3.3 billion, or $3.55 per share, compared with $2.9 billion, or $2.96 per share, in the year-ago period. On an adjusted basis, IBM IBM;
The company earned $3.87 per share from continuing operations, compared to analysts’ model of $3.79 per share.
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Revenue rose from $16.7 billion to $17.4 billion, compared to the FactSet consensus of $17.3 billion. The company’s software revenue increased 3%, consulting revenue increased 6%, and infrastructure revenue increased 3%.
The company’s software division, which brought in $7.5 billion in total revenue, saw an 8% increase in revenue from Red Hat.
“IBM’s strategic realignment, including exiting some outdated business areas, has shifted its focus to more technology-driven areas, particularly AI software,” Mei De, a research analyst at Global X, said in an email. ” he said. The company’s “movement to a platform-centric hybrid cloud strategy is significantly enhanced by the integration of Red Hat OpenShift, making it easier to manage and deploy applications across diverse computing environments.”
Meanwhile, software revenue classified as related to data and artificial intelligence rose 1%.
“Customer demand for AI is accelerating, and our book of business for WatsonX and generative AI approximately doubled from the third quarter to the fourth quarter,” CEO Arvind Krishna said. This was stated in the financial results announcement.
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Looking at the full year, IBM management expects the impact of currency fluctuations to have a negative impact on revenue growth of approximately 1 percentage point; The company models “revenue growth consistent with mid-digit models.”
IBM also expects free cash flow of about $12 billion in 2024.
Evercore ISI analyst Amit Daryanani called the free cash flow forecast, which cleared Wall Street’s $11 billion hurdle, “excellent.” Meanwhile, FactSet forecasts had predicted revenue growth would be below 3% in 2024. IBM’s expectations for this metric are also “well above street expectations,” he said.
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