By
Godfrey Benjamin
January 22nd, 2024
For the second quarter earnings, IBM benefitted immensely from the activities of its newly spun public-traded information technology infrastructure services offshoot Kyndryl Holdings.
American multinational technology corporation, IBM (NYSE: IBM) has released its second-quarter earnings report, surpassing expectations from analysts across the board. Despite the inherent strain the world over this year, the company said it generated total revenue of $15.54 billion, up 9% year-over-year, and about 16% higher at constant currency.
As against the $2.27 projected Earnings Per Share (EPS) from analysts polled by Refinitiv, IBM reported $2.31 earnings per share, adjusted.
“In the quarter we delivered good revenue performance with balanced growth across our geographies, driven by client demand for our hybrid cloud and AI offerings. The IBM team executed our strategy well,” said Arvind Krishna, IBM chairman, and chief executive officer. “With our first half results, we continue to expect full-year revenue growth at the high end of our mid-single digit model.”
IBM said revenue from its software business came in at $6.4 billion, up 6.4% and approximately a 12% increment at constant currency. IBM’s Hybrid Platform & Solutions shot up by 4 percent, up 9 percent at constant currency. As unveiled by Jim Kavanaugh, IBM’s Chief Financial Officer, IBM had it tough when it comes to recruiting for its consulting business due to the high competition in the labor force.
“Consulting, which makes up well over half of IBM’s workforce, is most impacted by the inflationary labor market and increasing labor cost as we bring new talent on board and increase capacity,” Kavanaugh said. “We are starting to capture the reality of these higher costs in our pricing, but given the time from contract signing to revenue realization, it’s taking some time to see it in our margins.”
Despite this strain, IBM reported revenue growth of $4.8 billion in its consulting unit, a figure that is up 9.8% when compared to the year-ago period.
IBM Earnings Propped Up by Kyndryl Offshoot
For the second quarter earnings, IBM benefitted immensely from the activities of its newly spun public-traded information technology infrastructure services offshoot, Kyndryl Holdings Inc (NYSE: KD).
It was through Kyndryl that the company’s latest mainframe, the z16 systems was sold in the quarter. As against the decline of about 19% reported in the first quarter, the z systems recorded a growth leap of 69% in the second quarter
Other deals worth mentioning in the second quarter include the completion of the acquisition of the company’s Watson health care data and analytics assets worth $1 billion by Francisco Partners. IBM, however, announced its plans to acquire cybersecurity startup Randori.
Despite the growth recorded in the second quarter, IBM is cautious about its forecast and is projecting about $10 billion in consolidated free cash flow for the full year, down from $10.5 published in April.
The company’s investors have been reacting to this negative projection with a 4.81% drop to $131.49 in Pre-Market trading. IBM shares is notably up 3% in the Year-to-Date period.