IBM Lifts on Earnings Beat, GenAI Optimism

International Business Machines (IBM) shares rose to a 10-year high on Thursday after topping revenue estimates and an optimistic forecast for generative artificial intelligence (AI).

Big Blue’s stock soared 9.53% to $190.50 per share on January 25 but shed 0.26% to $190.00 after-hours. Analysts expect the surge to trigger profit-taking, driving the price 0.60% lower to $188.86 apiece in the coming session.

IBM reported revenue of $17.40 billion in the fourth quarter, 0.64% higher than the Wall Street estimate of 17.29 billion. It also marked a 17.97% increase from Q3’s 14.75 billion and a 4.25% year-over-year jump from $16.69 billion in Q4 2022.

Moreover, the tech company’s earnings per share (EPS) of $3.87 beat the $3.76 market consensus by 2.93%. Its full-year revenue in 2023 stood at $61.90 billion, with a net income of $7.50 billion.

Chief Financial Officer (CFO) James Kavanaugh revealed the company’s plans to boost its free cash flow through workforce rebalancing. IBM aims to implement various initiatives to scale AI within the firm.

IBM will also continue the strategy that reaped an annual run rate (ARR) cost savings of $1.50 billion in 2023. Kavanaugh stated confidently that the Armonk-headquartered company could double ARR savings to $3.00 billion by year-end.

IMB has so far performed well in 2024, gaining 11.05% this week and 16.44% since the start of the year.

GenAI Sales to Boost IBM Growth in 2024

The 3.10% growth in IBM’s software business lagged the 5.80% expansion of its consulting sector last year. However, IMB CEO Arvind Krishna expects surging GenAI sales to make software the fastest-growing segment this year.

Krishna added that orders for the firm’s generative AI, which includes services powered by its Watsonx AI platform, doubled in Q4. He predicts GenAI sales will help the multinational company’s revenue advance by up to 6.00% in 2024.

IBM GenAI consumers use the technology to enhance coding productivity, optimize call center businesses, and boost digital labor. Krishna stressed that Big Blue was in the experimentation phase for its AI until last year and is shifting to scaling this year.