IBM's third-quarter figures exceeded projections both on their income and their expenditure. For them to reach their 2023 goal, they require an additional $5.4 billion in free cash flow in the fourth quarter, more than what has already been gathered over the first three-quarters of the year. IBM shares have shown a decrease of approximately 2% this year, compared to the S&P 500 index, which has increased by about 9% in the corresponding time span.
IBM's stock rose by 1% in after-hour trading Wednesday in response to its third-quarter results surpassing Wall Street analysts' forecasts. Allegedly, the company earned $2.20 adjusted per share compared to the expected $2.13, and had $14.75 billion in revenue, which was more than the projected $14.73 billion. The revenue grew by 4.6% year-on-year or 3.5% in constant currency, and net income totaled $1.70 billion or $1.84 per share; a year ago, the company was in the red with $3.20 billion and $3.54 per share, respectively, due to a $5.9 billion pension settlement charge.
IBM's Software gained $6.27 billion in revenue, which equaled 8% growth and fell in line with the $6.27 billion expectation, while the Consulting arm brought in $4.96 billion in revenue (approximately 6% rise) lower than the anticipated $5.11 billion. Jim Kavanaugh, IBM's CFO, noted that although the company maintains a good performance in consulting, clients are keen to cut costs, thus having an effect on discretionary consulting projects. The Infrastructure division earned $3.27 billion in revenue (a -2% variance than last year) and exceeded the $3.10 billion consensus.
For the full year, IBM reaffirmed its outlook for revenue growth at 3%-5% constant currency and $10.5 billion in free cash flow, with the nine-month total being $5.12 billion. Moreover, IBM announced the release of Granite generative AI models for text composing and summarizing, as well as its support for the AI startup Hugging Face and the RT Apptio acquisition from Vista Equity Partners for $4.6 billion, with the first quarter in generative AI bringing in hundreds of millions of dollars.
Looking at the year's performance, IBM's stocks have decreased by around 2%, lagging behind the S&P 500, which went up approximately 9%.
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