IBM reports solid first quarter as a ‘more focused’ businessLeigh Mc Gowranon April 20, 2022 at 09:20 Silicon RepublicSilicon Republic

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

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

This is the first full quarter recorded since IBM made the decision to spin off its IT infrastructure business as Kyndryl last November. This was first announced in 2020 as a way for the company to focus on AI and cloud.

The company’s decision showed positive results at the end of 2021, when IBM sales were reportedly at their highest in at least 10 years.

“Demand for hybrid cloud and AI drove growth in both software and consulting in the first quarter,” IBM chair and CEO Arvind Krishna said. “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,” Krishna added.

Software revenue was up 12.3pc at $5.8bn, while consulting revenue rose by 13.3pc. The results of other sectors show the focused direction IBM is taking, as infrastructure went down by 2.3pc, while financing dropped by more than 26pc.

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,” 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 due to the invasion of Ukraine, MarketWatch reported.

“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 $300 million of revenue and about $200 million of profit and cash.”

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