{"id":6182,"date":"2022-01-25T00:30:08","date_gmt":"2022-01-25T00:30:08","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/01\/25\/ibm-impresses-with-strong-sales-and-earnings-growth\/"},"modified":"2022-01-25T00:30:08","modified_gmt":"2022-01-25T00:30:08","slug":"ibm-impresses-with-strong-sales-and-earnings-growth","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/01\/25\/ibm-impresses-with-strong-sales-and-earnings-growth\/","title":{"rendered":"IBM impresses with strong sales and earnings growth"},"content":{"rendered":"

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IBM Corp. surprised and delighted investors with fourth-quarter revenue and profit that beat analysts\u2019 forecasts on the strength of its Red Hat cloud computing business, increasing annual recurring revenue, and sales to the\u00a0recently spun-off<\/a>\u00a0Kyndryl Holdings Inc.<\/p>\n

Quarterly sales of $16.7 billion rose 8.6% and easily beat consensus estimates of $15.96 billion. Adjusted earnings per share of $3.35 also beat estimates of $3.30.<\/p>\n

Software revenue \u2014 a key part of IBM\u2019s promise to grow at a mid-single-digit percentage rate for the year \u2013 rose 10% and consulting revenue jumped 16%. Revenue from IBM\u2019s Red Hat Inc. subsidiary grew 21% as IBM has positioned it as a cornerstone of its hybrid cloud strategy. \u201cWe are continuing to take share with the Red Hat offering,\u201d said Chief Financial Officer James Kavanaugh.<\/p>\n

\u201cWe expect that Red Hat will continue to be the strong foundation for IBM Consulting\u2019s growth, especially given its pivotal role in IBM\u2019s hybrid cloud portfolio strategy,\u201d said Bola Rotibi, research director for software development at CCS Insight Ltd.<\/p>\n

Cloud revenue rose 32%, to $8 billion, and hybrid cloud revenue surged 18%, to $6.2 billion, finishing the full year up 19%, to $20.2 billion. Chief Executive Arvind Krishna (pictured) said IBM finished the year with 3,800 hybrid platform clients and 700 Red Hat engagements.<\/p>\n

This was the third quarter in the last four that IBM revenue has grown, reversing nearly three years of steady declines. \u201cWhile one good quarter doesn\u2019t make a trend, I believe three do and at a minimum, I believe we will see mid-single-digit growth in the near future,\u201d said Patrick Moorhead, principal analyst at Moor Insights & Strategy.<\/p>\n

A software business<\/h3>\n

Kavanaugh said more than 70% of the company\u2019s revenue now comes from software and services and that annual recurring revenue is now $13 billion. The latter is an important indication of business stability, as is the $7.6 billion of cash the company had in the bank at the end of the year. IBM also said it expects to generate between $10 billion and $10.5 billion in free cash flow in 2022.<\/p>\n

IBM stock initially soared more than 6% in after-hours trading before settling down to a half-point gain.<\/p>\n

\u201cWe\u2019ve done a lot of heavy lifting,\u201d Krishna said, referring to the four acquisitions IBM completed in the quarter as well as the divestiture of Kyndryl. \u201cI fundamentally believe that we have the right focus to deliver on our midterm model. We are now approximately a 30% consulting company, 70% technology company.\u201d<\/p>\n

On a conference call with analysts, executives repeatedly touted the value of the Kyndryl spinoff as having benefited IBM\u2019s product sales. \u201cAll the [14%] growth in transaction processing came from our Kyndryl relationship,\u201d Kavanaugh said.<\/p>\n

About half of the growth in the software and infrastructure businesses also came from incremental external sales to Kyndryl. The relationship will contribute an additional three percentage points of growth spread across the first two quarters, according to Kavanaugh. \u201cWe have benefited substantially from the new Kyndryl relationship,\u201d he said.<\/p>\n

Consulting revenue grew 16%, \u00a0thanks in part to engagements resulting from new partnerships with Salesforce.com Inc., Amazon Web Services Inc., Microsoft Corp., Adobe Inc. and others. IBM\u2019s Garage digital transformation consulting business finished the quarter with 3,000 active engagements and renewal rates are increasing, Krishna said.<\/p>\n

\u201cThe push for returning to offices will undoubtedly influence the cloud market, but many organizations will still be firmly on a cloud journey,\u201d Rotibi said. \u201cWe expect IBM Consulting to show continued strength in operation and growth.\u201d<\/p>\n

Photo: Robert Hof\/SiliconANGLE<\/h5>\n
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