Athira Sethu
Kochi, 24 October 2024
IBM reported a mixed set of third-quarter performance in the third quarter ended September. Its shares dropped 3% after the company reported revenues below Wall Street estimates.
Here is a quick glance at how IBM performed:
- Earnings per Share: IBM reported $2.30, which was better than the expected $2.23.
- Revenue: The company earned $14.97 billion, but this was below the expected $15.07 billion.
In comparison to the same period last year, total revenues for IBM increased by 1.5%. The company, however, incurred a net loss of $330 million or 36 cents a share, against a profit of $1.70 billion, or $1.84 a share, last year. The loss was a one-time charge related to a pension settlement.
For Q4, IBM would also be looking at revenue to come in almost on the same line as it did for the third quarter, with 2% growth on a currency-adjusted basis. Free cash flow of more than $12 billion for 2024 was targeted, and they have managed so far to produce $6.59 billion in free cash flow for the first nine months of the year.
In the third quarter, IBM software again topped expectations. IBM earned about 10% higher than last year for $6.52 billion in the software segment. A critical observation here is that IBM got off to a flying start with revenue coming from the company Red Hat, which IBM bought way back in 2019. The growth was a 14% rise in revenue.
However, consulting services revenue only grew to $5.15 billion in the quarter, up a mere 0.7 percent, not meeting expectations. According to the finance chief of the firm, Jim Kavanaugh, the company’s consulting unit is also being hurt by the current economy.
IBM’s infrastructure revenue came in at $3.04 billion, down 7 percent and below what analysts were expecting. Kavanaugh noted that customers are eagerly anticipating a new mainframe computer, which they expect will ship early next year.
On a brighter side, the business of IBM’s generative artificial intelligence is over $3 billion and its consulting services amount to 80% of that figure.
Over the quarter, IBM announced that it would be expanding its Oracle consulting services and went on another acquisition spree, in this case partnering with an Oracle services company, Accelalpha.
IBM shares, excluding this quarter’s drop in the stock price, have risen around 43% this year; the S&P 500 index has risen by around 21%.
