IBM Forecasts Revenue Growth Above AI Adoption Estimates

(CTN News) – On Wednesday, IBM forecast revenue growth that exceeded market expectations due to stable demand from businesses interested in adopting artificial intelligence (AI).

In extended trading, shares of the company rose by more than 8%.

An IBM spokesperson confirmed that the company will also lay off some employees in 2024, but will hire for more AI-oriented roles. However, the company’s headcount is likely to remain largely unchanged.

According to the spokesperson, IBM may be required to make a rebalancing charge similar to the $400 million recorded in 2023.

As the CEO of this more than 111-year-old company, Arvind Krishna has repositioned it to focus on software and consulting, leveraging a broader push for AI integration across industries.

Big Blue’s generative AI book of business, which comprises actual sales and bookings from a variety of offerings, nearly doubled sequentially in the fourth quarter, according to its CEO Arvind Krishna.

Finance chief James Kavanaugh told Reuters that about one-third of this revenue came from software, while the rest came from consulting. He also noted that the company inked AI-related deals with new customers, including German software giant SAP SE.

Among IBM’s strengths is its consulting arm in artificial intelligence, which, along with its increasingly relevant AI software solutions, positions it favorably against its competitors, according to May De, analyst at Global X ETFs.

According to LSEG data, IBM expects revenue in 2024 to grow in the mid-single digits, at around 4%-6%, compared with Wall Street expectations of about 3%.

The company’s technology budgets are expected to remain consistent with those of 2023 into ’24, according to CEO Krishna in a post-earnings conference call.

In addition, Kavanaugh noted that IBM continues to operate in a “very volatile and uncertain economic environment.”. However, IBM reported a 3% increase in software revenue and adjusted profit during the fourth quarter, which exceeded analysts’ expectations.

According to Kavanaugh, the infrastructure segment, which houses its mainframe business, reported fourth-quarter revenue of $4.6 billion, compared with Visible Alpha’s estimate of $4.29 billion.

According to Kavanaugh, exchange rates are expected to negatively affect revenue in 2024 by 100 basis points.

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