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IBM expects to exceed annual revenue target on resilient cloud momentum
Global Banking & Finance Review®
Company
By Chavi Mehta
(Reuters) -IBM Corp beat quarterly earnings estimates on Wednesday and said it expects to exceed full-year revenue growth targets as robust demand for the company’s digital services helps cushion the blow from a strong dollar.
The IT software and services provider has been focusing on the so-called “hybrid cloud” after spinning off its legacy IT-managed infrastructure business, and posted double-digit growth across all its segments and geographies on a constant-currency basis in the third quarter.
IBM’s shares rose 4.4% in extended trading.
The company’s stock is proving to be a good place to hide in the current market turmoil, mainly due to IBM’s revenue diversification, Haris Anwar, senior analyst at Investing.com, said.
IBM, whose cloud revenue rose 11% to $5.2 billion in the quarter, now expects the company’s annual sales to increase more than its previous estimate of mid-single-digit growth at constant currency.
Enterprise spending is robust in the Americas, but IBM is seeing some softness in key areas such as new bookings and backlog churn in Western Europe due to the macroeconomic environment there, Finance Chief James Kavanaugh told Reuters.
This year’s more than 17% surge in the dollar has also eaten into IBM’s earnings, mirroring a trend seen at peers such as Microsoft Corp and Salesforce Inc that also have large international operations.
IBM, which gets more than half its revenue from outside the United States, increased its full-year estimate for foreign exchange impact to 7% from 6%.
The company booked a forex hit of $1.1 billion in the third quarter.
Revenue came in at $14.12 billion, compared with $13.51 billion expected by analysts, according to Refinitiv data.
On an adjusted basis, IBM earned $1.81 per share, beating estimates of $1.77.
IBM’s earnings are a sign that for enterprise-focused tech companies recessionary impacts will potentially be more of a lagging indicator, Futurum Research analyst Daniel Newman said.
(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna Chandra Eluri and Shounak Dasgupta)
Cloud computing is the delivery of computing services over the internet, allowing users to access and store data and applications on remote servers instead of local computers.
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another, facilitating international trade and investment.
Revenue diversification is a strategy used by companies to increase their income sources by expanding into new markets or offering new products and services.
Enterprise spending refers to the financial outlays made by businesses for goods and services necessary for their operations, often reflecting their investment in growth and development.
Adjusted earnings are a company's profits that have been modified to exclude certain one-time expenses or income, providing a clearer picture of ongoing operational performance.
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