Monday, May 23, 2022

Strong cloud demand drives IBM to achieve strongest revenue growth in 10 years

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IBM announced quarterly revenue on Monday that exceeded analysts’ forecasts, according to the morning news on January 25, Beijing time. This was largely due to robust business demand for software, which included IBM’s hybrid cloud, demonstrating that the company’s transformation efforts are paying off.

Sales increased 6.5 percent year over year to $16.7 billion in the quarter ending Dec. 31, the largest increase in at least a decade. According to Bloomberg data, analysts projected $16 billion on average. On Monday, IBM shares soared as much as 7.5 percent in after-hours trading on the New York Stock Exchange before falling.

Jim Kavanaugh, IBM Chief Financial Officer, said: “This is the beginning of a new IBM and our view of the future. We are seeing a very healthy acceleration in key growth areas such as cloud computing and consulting. .”

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The main business group at IBM, software, gained 8.2 percent to $7.3 billion in revenue. The consulting division, formerly known as “Global Business Services,” brought in $4.7 billion in revenue, up 13% from the previous year.

IBM broke off a big chunk of its traditional infrastructure services business into a new company named Kyndryl last November. Client data center collocation is part of Kyndryl’s business, as is traditional IT assistance. This is IBM’s fourth major transformation and a significant step forward in Chief Executive Arvind Krishna’s efforts to convert the company into a cloud computing and artificial intelligence powerhouse.

Revenue from IBM’s hybrid cloud business increased 62 percent year over year to $6.2 billion in the third quarter. Red Hat’s income climbed 19 percent year over year among them.

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Krishna’s strategy of guiding IBM, which has traditionally focused on mainframes and IT services, into the fast-growing cloud computing industry, has driven IBM’s sales growth after years of stagnation. Even though more businesses have shifted their operations online in recent years, IBM still confronts intense competition in cloud computing services from competitors like Microsoft and Amazon. In this case, IBM seeks to set itself apart from its public cloud-based competitors by emphasizing hybrid cloud services. Customers can use a hybrid cloud architecture to integrate their computing equipment, private cloud services, and public cloud services.

Morningstar analyst Julie Bhual Sharma said: “In the past, IBM has benefited from systems that were not so easy to integrate, but the development of cloud computing has changed that. The pandemic has prompted companies to move tasks to the cloud. Since this trend cannot be reversed by customers, they will go to the best supplier in the market.”

During the height of the pandemic, Krishna was named CEO of IBM. Before that, he was a major figure in IBM’s hybrid cloud strategy and was instrumental in the company’s $33 billion acquisition of Red Hat. IBM announced the sale of a portion of its Watson Health business to private equity firm Francisco Partners earlier this month, indicating that the company is shrinking its once-promising health division.

Krishna said IBM “has done a lot of the hard work that has to be done, and I think we have the correct composition of the business right now” when asked if it will make further substantial architectural changes after spinning off Kyndryl.

In 2022, IBM predicts revenue growth in the mid-single digits, with a 3 percent lift from further Kyndryl sales. Bloomberg market intelligence analyst Anurag Rana said: “IBM’s guidance corresponds to 7% to 8% year-over-year increase, which is a positive sign. They will, however, continue to face severe year-over-year comparisons in the second half.”

IBM earned $3.35 per share for the quarter after one-time costs, exceeding analysts’ average expectation of $3.23. The gross margin was 56.9%, exceeding analysts’ expectations of 56.1 percent.

also read:

Neuralink ready to take its brain chip for human trials

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Nivedita Bangari
Nivedita Bangari
I am a software engineer by profession and technology is my love, learning and playing with new technologies is my passion.

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