IBM forecast full-year revenue growth above market estimates on Wednesday, banking on stable demand for its IT software and consultancy services from businesses looking to adopt artificial intelligence (AI).
Shares of the company were up more than 8% in extended
trading.
The company will also lay off some employees in 2024 but
will hire for more AI-centered roles, an IBM spokesperson said, and will likely
end the year with a largely unchanged headcount.
IBM may see a rebalancing charge similar to the about $400
million recorded in 2023, the spokesperson added.
Under CEO Arvind Krishna, the more than 111-years-old
company has repositioned itself to focus on software and consulting with a
renewed focus on AI, capitalizing on a broader push for its integration across
industries.
The Big Blue's generative AI book of business, comprising
actual sales and bookings from various offerings, roughly doubled sequentially
in the fourth quarter, CEO Arvind Krishna said.
About one-third of this came from software, and the rest
from consulting, finance chief James Kavanaugh told Reuters, adding the company
inked AI-related deals with new customers, including Germany's SAP SE
(SAPG.DE), opens new tab.
"A notable edge for IBM is its consulting arm in AI,
which, coupled with its increasingly relevant AI software solutions...positions
it favorably against competitors," said May De, analyst at Global X ETFs.
IBM expects 2024 revenue to grow in the mid-single-digits,
at around 4%-6%, compared with Wall Street expectations of about 3%, according
to LSEG data.
"Technology budgets should stay in line with 2023 going
into '24," CEO Krishna said on a post-earnings call.
Kavanaugh added IBM continues to operate in a "very
volatile and uncertain" economic environment. Still, IBM reported
fourth-quarter revenue and adjusted profit above estimates, with its largest
segment - software - up about 3%.
The infrastructure segment, which houses its mainframe
business, reported fourth-quarter revenue of $4.6 billion, compared with
Visible Alpha estimates of $4.29 billion, driven by enhancements such as
embedded AI on chips, according to Kavanaugh.
Exchange rates are expected to hurt 2024 revenue by 100
basis points, Kavanaugh added.
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