International Business Machines Corporation
CEO : Mr. Arvind Krishna
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 412.2% YoY | 44.9% | 106.2% | 2023-01-25 |
Jim Kavanaugh says,
Financial Highlights
- Revenue of $16.7 billion, up over 6% at constant currency
- Operating pre-tax income of $3.8 billion and operating earnings per share of $3.60
- Generated $5.2 billion of free cash flow
Segment Performance
- Software revenue up 8%, fueled by growth in both hybrid platform and solutions and transaction processing
- Consulting revenue grew 9%, strong demand for offerings led to signings growth of 17%
- Infrastructure revenue grew 7%, driven by hybrid infrastructure, which was up 11%
Hybrid Cloud Strategy
- Annual recurring revenue for hybrid platform and solutions is $13.3 billion
- Hybrid cloud revenue is now more than $9.3 billion over the last year, up 16%
- Approach to hybrid cloud is platform-centric
Profit Metrics
- Expanded operating pre-tax margin by 170 basis points
- Pre-tax margin for software was nearly 25% for the year
- Pre-tax margin for consulting was 11% for the quarter and nearly 9% for the year
- Pretax margin for infrastructure was nearly 15% for the year
Expectations for 2023
- Expect constant currency revenue growth for the year to be in line with mid-single-digit model
- Expect solid growth in revenue and free cash flow
Arvind Krishna says,
Revenue Growth and Free Cash Flow
- The company delivered strong revenue growth in Q4 2022 and full year, which was broad-based across software, consulting, and infrastructure segments as well as across geographies.
- For 2023, the company predicts revenue growth in line with its mid-single-digit model range and about $10.5 billion of free cash flow, keeping the company on a path of sustainable growth.
Hybrid Cloud and AI Strategy
- Hybrid cloud and AI are the two most transformative technologies for business today, and these technologies work together to drive business outcomes.
- IBM’s hybrid cloud platform approach, built on Red Hat, is the leading container platform, allowing clients to harness the power of open source software innovations.
- IBM and its consultants help clients leverage hybrid cloud to modernize options, automate operations, and integrate security, resulting in real value for clients.
- IBM has been co-creating with many clients to deploy AI at scale, which is projected to contribute $16 trillion to the global economy by 2030.
Investments and Acquisitions
- The company invested in hybrid cloud and AI capabilities and delivered significant innovations in infrastructure with its z16 and Power platforms.
- IBM is investing in large language, its foundation models for clients, and has infused these capabilities across its AI portfolio.
- The company is expanding and better enabling its broader ecosystem with recently launched Partner Plus, a new simplified program that increases its reach and scale through new and existing IBM partners.
- The company acquired Octo, which improves its footprint in the US federal market, and capped the year with eight acquisitions across software and consulting.
Eco-Friendly Initiatives
- IBM software has helped the company reduce its own carbon footprint, and it has simplified and automated its sustainability reporting processes and reduced reporting costs by 30%.
- As sustainability becomes more of a priority, companies need digital technologies to analyze data, creating a baseline and improve the way they operate.
Q & A sessions,
Transaction Processing Business
- Transaction processing business is expected to have a low single-digit increase for the short-to-medium-term model looking forward
- MIPS growth, criticality of software, and modest pricing uplift to contribute to increase
Software Business
- Software business is expected to have mid-single digit recurring revenue growth
- ’22 was a great year for ELA but ’23 will be not as good
- Transactional piece of the business being less than 20% has a smaller impact on overall growth rate
Monetization of AI
- Monetization of AI is focused on $16 trillion productivity gain through enterprise automation
- Focus on automating drive-through and order taking for quick-serve restaurants, deflection rates at call centers, Watson-powered AI chatbots for pension management, etc.
Product Capabilities
- Focus on automation, data AI, and cyber
- AIOps portfolio for IT infrastructure optimization with multiple public clouds and on-premise capabilities
- Focus on data fabric that allows clients to leverage their data wherever it is
- Threat management in cybersecurity with inputs from all sources
- Expect organic and inorganic investment
New Application Development and Infrastructure
- Lower end of mid-single digit is largely from Infrastructure segment being a headwind going into 2023 compared to a tailwind in 2022
- Consulting teams largely focused on new development and automation for clients using OpenShift from Red Hat, Red Hat Linux, and AI automation
No bad stock 