IBM Beats Across the Board, Posts Revenue Growth After Four Quarters of Declines

Brian Ach | Getty Images
  • IBM reported revenue growth after four quarters of declines.
  • The company announced acquisitions of two cloud consulting firms in the quarter.

IBM shares rose up to 4% in extended trading on Monday after the enterprise technology and services maker reported first-quarter earnings that came in better than analysts had expected.

Here's how the company did:

  • Earnings: $1.77 per share, adjusted, vs. $1.63 per share as expected by analysts, according to Refinitiv.
  • Revenue: $17.73 billion, vs. $17.35 billion as expected by analysts, according to Refinitiv.

Revenue grew by 0.9% on an annualized basis in the quarter, compared with a 6% decrease in the prior quarter, according to a statement. The company reiterated previous guidance of revenue growth for the full year.

"I think that the spend environment overall is improving, Matt. I think I can say that, definitely compared to the fourth quarter," IBM CEO Arvind Krishna said in response to a question from an analyst on a conference call.

IBM's Global Technology Services segment, which handles managed services, outsourcing and support, contributed $6.37 billion in revenue. Its revenue was down 1% year over year, but it was more than the FactSet consensus estimate of $6.32 billion. IBM plans to spin off part of the segment as a standalone public company called Kyndryl by the end of the year.

"This quarter, we saw an improved trajectory in project activity and client-based business volumes including in some of the industries most affected by the pandemic such as retail and consumer products," said Jim Kavanaugh, IBM's finance chief.

IBM's Cloud and Cognitive Software division, which includes Red Hat, came up with $5.44 billion in revenue, which was up 4% and above the $5.30 billion FactSet consensus. IBM reported $529 million in capital expenditures in the quarter, down 28%.

Global Business Services, the unit that includes consulting, contributed $4.23 billion in revenue, which was up 2% and higher than the $4.03 billion consensus.

Systems revenue of $1.43 billion, from sales of mainframe computers and other hardware, was up 4% and above the $1.29 billion consensus estimate.

"We had traction in areas like financial services where robust market volatility drove demand for increased capacity," Kavanaugh said.

In the quarter IBM announced that it was acquiring 7Summits, a Salesforce consulting firm, from private-equity-firm Sverica Capital Management, and that it was buying Taos, a consulting group that works on cloud migrations. IBM also said it had sold 250 patents to grocery-delivery company Instacart.

One analyst asked for an update on IBM's Watson Health division, which Bloomberg reported in February that IBM was thinking about selling, but Krishna declined to discuss the subject. Krishna instead talked about how elements of the Watson brand of artificial-intelligence software exists across the company's product lineup.

Excluding the after-hours move, IBM shares are up around 6% since the start of 2021, while the S&P 500 index has grown nearly 11% over the same period.

Copyright CNBC
Contact Us