IBM Projects Strong Revenue Growth, AI Bookings Surge
International Business Machines Corp. (IBM) extended trade gains after announcing robust revenue projections and a surge in AI-related bookings for its upcoming fiscal year.
Key Highlights:
* Forecasts $13.5 billion in free cash flow for fiscal year ending December 2025, exceeding Wall Street estimates of $12.9 billion.
* Revenue expected to increase at least 5% in constant currency, with current exchange rates potentially reducing that growth by 2%.
* AI consulting and software bookings topped $5 billion since mid-2023, up from $3 billion reported in July.
* 80% of bookings stem from its consulting unit, with the remainder coming from software.
* IBM's transformation towards software and services is evident through acquisitions, including the proposed takeover of Hashicorp Inc. and the 2023 purchase of Apptio for $4.6 billion.
Financial Performance:
* Shares increased 10% in extended trading, adding to a 22% gain over the past 12 months.
* Total sales rose 1% to $17.6 billion for the period ending December 31, slightly above analyst estimates of $17.5 billion.
* Software unit remains the largest and fastest-growing segment, with a 10% increase to $7.92 billion, driven by Red Hat's 16% growth.
* Adjusted profit of $3.92 per share exceeded expectations of $3.74.
* Sales in IBM's consulting unit declined for a fourth consecutive quarter, falling to $5.18 billion.
AI and Government Impact:
* Customers are shifting focus from traditional consulting projects to AI-oriented ones, according to CFO Jim Kavanaugh.
* IBM expects the new Trump administration's tech initiatives to present "significant opportunities."
* The company's exposure to the federal government is 3%-4% of revenue.
Future Outlook:
* IBM will host an event next week to provide analysts with more detailed expectations for the next few years.