Business

IBM forecasts annual revenue growth above estimates

Company is capitalising on a broader push for AI integration across industries

IBM employs more than 3,000 people in Ireland. Photograph: Mary Altaffer/AP

Wed Jan 24 2024 - 21:43

IBM forecast full-year revenue growth above market estimates on Wednesday, banking on stable demand for its IT software and consultancy services from businesses looking to adopt artificial intelligence (AI).

The company employs more than 3,000 people in Ireland.

Shares of the Armonk, New York-based company rose nearly 5 per cent in extended trading.

The company is capitalising on a broader push for AI integration across industries by offering services that help enterprises deploy technology such as OpenAI’s viral ChatGPT.

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Its generative AI book of business, comprising actual sales and bookings from a variety of offerings including the Watsonx AI platform and consulting contracts, roughly doubled sequentially in the fourth quarter, CEO Arvind Krishna said.

About a third of the AI book came from software, with the rest coming from consulting, finance chief James Kavanaugh said, adding the inked AI-related deals with various new customers during the quarter, including Germany’s SAP SE.

IBM expects revenue to grow consistent with its mid-single-digit model, at roughly about 4-6 per cent in 2024, compared with Wall Street expectations of about 3 per cent, according to LSEG data.

Mr Kavanaugh added IBM continues to operate in a “very volatile and uncertain” economic environment. Rivals such as Accenture and India’s Tata Consultancy Services had flagged weak discretionary spending as enterprise clients deal with macroeconomic burdens.

In the three months ended December 31st, IBM reported revenue of $17.38 billion (€15.9 billion), compared with estimates of $17.3 billion.

The Big Blue’s software segment – its largest by revenue share – generated $7.51 billion in the fourth quarter, up about 3 per cent from a year earlier.

IBM's infrastructure segment, which houses its mainframe business, reported fourth-quarter revenue of $4.6 billion, compared with Visible Alpha estimates of $4.29 billion.

Growth in the infrastructure segment was driven by various enhancements to the ongoing mainframe cycle such as embedded AI on chips used in the devices, according to Mr Kavanaugh.

A relatively weaker US dollar benefited revenue in the fourth quarter by about 80 basis points, but in 2024, exchange rates are expected to hurt revenue by 100 basis points, Mr Kavanaugh added. – Reuters

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