IBM marks strong start to new chapter as cloud revenue booms

By Chavi Mehta

(Reuters) -IBM on Monday beat Wall Street estimates for revenue in the fourth quarter, as its focus on the cloud paid off in Big Blue’s first earnings after exiting the slow-growing managed infrastructure business.

Shares of the IT giant jumped as much as 7% aftermarket before easing to trade flat, with the company reiterating its forecast for mid-single-digit revenue growth in 2022, compared with 3.9% last year.

“This will be the first quarter where you’ll see what today’s IBM looks like, and that is a higher revenue growth company,” Chief Financial Officer James Kavanaugh told Reuters in an interview.

The 110-year-old company has doubled down on the software and consulting businesses after shedding its former managed infrastructure unit in November following years of growth and margin pressures.

Revenue at IBM’s consulting business rose 13.1%, while cloud revenue jumped 16% to $6.2 billion in the quarter.

With cloud adoption surging worldwide, the company has shifted its focus to the so-called “hybrid-cloud”, where enterprises use a combination of their own data centers and leased computing resources to store and process data.

U.S. revenue rose in the mid-single digits during the quarter even as the Omicron variant raged across the country, Kavanaugh said, adding that industries hit hard early by the pandemic were bouncing back.

IBM’s revenue rose 6.5% to $16.7 billion, adjusted for the separation of the managed infrastructure services business, now Kyndryl. Analysts on average had expected $15.96 billion, according to IBES data from Refinitiv.

“IBM hasn’t had this kind of result and with the spin-off, a lot of this sentiment was that it was going to take a few quarters for this to flush out,” Futurum Research analyst Daniel Newman said.

Excluding items, IBM earned $3.35 per share, beating estimates of $3.30.

(Reporting by Chavi Mehta in Bengaluru; Editing by Devika Syamnath)