IBM Revenue Up 8% on Continued Momentum in Hybrid Cloud Business

International Business Machines Corp.

reported a stronger-than-expected 8% revenue increase in the first quarter on continued momentum in its hybrid cloud platform, a key focus of the tech company’s transformation.

Revenue rose to $14.2 billion, from $13.19 billion a year earlier, beating analysts’ expected $13.78 billion, according to FactSet. The results were boosted by a 14% revenue increase from the hybrid cloud, which straddles public clouds, private clouds and as-a-service properties.

The company now expects revenue growth this year at the high end of its mid-single-digit forecast in constant currency. Incremental sales to

Kyndryl Holdings Inc.,

KD -3.27%

the IT services business that IBM spun off last year, are expected to add 3.5 percentage points to 2022 revenue, it said.

IBM’s stock closed Tuesday 2.4% higher at $129.15 and gained 1.5% in recent after-hours trading.

Chief Financial Officer

Jim Kavanaugh

said the revenue growth reflected true demand, driven by companies spending more on digital investments in areas like automation, artificial intelligence and cybersecurity.

“Most of this growth is, right now, more demand-driven as clients and industries are looking to create sustainable, competitive advantage,” Mr. Kavanaugh said in an interview. The effects of inflation, from supply chain to the cost of talent acquisition, he said, will play out over time.

Big tech firms are investing in data centers as they compete for the $214 billion cloud computing market. WSJ explains what cloud computing is, why big tech is betting big on future contracts.

An information technology pioneer, IBM is reshaping itself around AI and hybrid cloud, which benefited from the rise of remote work and other changes in IT workloads during the pandemic. In 2021, IBM acquired 15 companies to strengthen hybrid cloud and AI capabilities.

Chief Executive

Arvind Krishna,

who had run the company’s cloud and cognitive-software division, has said the transformation would include a cultural shift, one that encourages more risk-taking to drive growth—and ensured a higher tolerance for failure.

For the period ended March 31, IBM posted a profit of $733 million, or 81 cents a share, compared with $955 million, or $1.06 a share, a year earlier. Profit from continuing operations, however, rose to $662 million from $403 million a year earlier. Excluding impacts from items like acquisitions and the Kyndryl spinoff, operating profit was $1.40 a share in the latest period. Analysts recently polled by FactSet expected $1.39 a share.

Software revenue rose 12% in the latest period, which included revenue from its commercial relationship with Kyndryl.

Consulting revenue rose 13%, while infrastructure revenue was again the laggard, with a 2% revenue decline in the March quarter.

Write to Maria Armental at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the April 20, 2022, print edition as ‘IBM Beats Forecasts With 8% Sales Gain, Driven by the Cloud.’

https://www.wsj.com/articles/ibm-revenue-up-8-on-continued-momentum-in-hybrid-cloud-business-11650399768