IT hardware and services company IBM beat quarterly revenue expectations on Monday but warned that the hit from foreign exchange for the year could be about $3.5 billion due to a strong dollar. A hawkish Federal Reserve and heightened geopolitical tensions have driven gains in the dollar against a basket of currencies over the last year, prompting companies with sizeable international operations, including Microsoft and Salesforce, to temper expectations.
IBM now expects a foreign exchange hit to revenue of about 6
percent this year, Chief Financial Officer James Kavanaugh told Reuters. It had
previously forecast a 3 percent to 4 percent hit.
Second-quarter revenue was hurt by $900 million due to a
stronger US dollar, Kavanaugh said.
Typically, a stronger dollar eats into the profits of
companies that have sprawling international operations and convert foreign
currencies into dollars.
However, strong demand at its consulting and infrastructure
businesses helped IBM post second-quarter revenue of $15.54 billion, beating
analysts' average estimate of $15.18 billion, according to Refinitiv data.
IBM sees revenue growth continuing, including in regions
such as Europe and Asia Pacific, despite geopolitical turmoil and inflationary
pressures, Kavanaugh said, echoing words of peer Accenture, which had last
month said it does not foresee a pull back in client spending.
The 110-years-old company, whose revenue growth had hit
near-stagnation for years, spun-off its large and laggard IT-managed
infrastructure business last year and placed its hopes on high-growth software
and consulting businesses with a focus on the so-called "hybrid
cloud". Cloud revenue rose 18 percent to $5.9 billion © Reuters