United States tech giant, International Business Machines Corp (IBM). posted its first revenue gain in eleven quarters, driven by demand for cloud services, suggesting Arvind Krishna’s turnaround plan is starting to bear fruit.
Sales increased 1 per cent to US$17.7 billion in the three months ended Mar. 31, the Armonk, New York-based company said Monday in a statement. That beat the US$17.3 billion analysts had forecast, on average, according to data compiled by Bloomberg. The shares jumped in extended trading.
IBM reported first-quarter revenue growth in three of its five business segments, including Cloud and Cognitive Software, the company’s biggest unit, which saw 3.8 per cent growth in sales from a year earlier. The Global Business Services and Systems units, which includes hardware and operating systems software, also posted year-over-year sales increases of 2.4 per cent and 4.3 per cent, respectively.
April marks a full year at the helm for Krishna, who took over the role of chief executive officer from Ginni Rometty with plans to focus on artificial intelligence and the cloud to revive growth after years of stagnation. Krishna has reorganized the 109-year old tech giant around a hybrid-cloud strategy, which allows customers to store data in private servers and on multiple public clouds, including those of rivals Amazon.com Inc. and Microsoft Corp. Total cloud revenue increased 21 per cent to US$6.5 billion in the first quarter.
Krishna attributed “increasing client adoption of our hybrid-cloud platform,” as well as growth in software and consulting, to helping the company “get off to a solid start for the year.”
Last October, Krishna spun off IBM’s managed infrastructure services unit into a separate publicly traded company, which will be called Kyndryl and be based in New York. The division, currently part of IBM’s Global Technology Services division, handles day-to-day infrastructure service operations like managing client data centers and traditional information-technology support for installing, repairing and operating equipment. The unit has seen business shrink as customers embraced the shift to the cloud, and many clients delayed infrastructure upgrades during the pandemic. It was one of only two of IBM’s units to see revenue decline in the first quarter, with sales down 1.5 per cent. The spinoff is scheduled to be completed by the end of this year.
IBM also said revenue from Red Hat, which it bought in 2019 for US$34 billion, gained 17 per cent in the first quarter.
Earnings excluding some costs were US$1.77 a share, beating the average analyst estimate of US$1.65. Gross margin was 47.3 per cent, compared with the 47.2 per cent analysts expected. IBM said it expects to report revenue growth for the full year.