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IBM’s stock saw a 5% increase in extended trading on Wednesday following the company’s announcement of second-quarter earnings that exceeded analysts’ forecasts.
The company reported adjusted earnings per share (EPS) of $2.43, surpassing the expected $2.20. Revenue also came in ahead of predictions at $15.77 billion, compared to the expected $15.62 billion. This marks a 1.9% increase from the $15.48 billion reported a year ago. Net income rose to $1.83 billion, or $1.96 per share, up from $1.58 billion, or $1.72 per share, from the previous year.
IBM’s strong performance extends beyond the quarterly figures. The company now anticipates 2024 free cash flow will exceed $12 billion, up from its previous forecast of around $12 billion made in April. Additionally, IBM’s business in generative artificial intelligence has grown substantially, surpassing $2 billion, more than doubling its figure from April.
CEO Arvind Krishna expressed confidence in the technology sector’s outlook despite ongoing challenges. “We remain confident in the positive macro outlook for technology spending,” Krishna noted. However, he acknowledged the impact of persistent high interest rates, inflation, and geopolitical uncertainties, including conflicts in Europe and the Middle East.
The company’s software division achieved $6.74 billion in revenue, exceeding the StreetAccount consensus of $6.49 billion by 7%. In contrast, IBM’s consulting segment generated $5.18 billion, falling short of the $5.23 billion consensus and marking a slight decline of 0.9%. The infrastructure segment, which includes mainframe computers, posted $3.65 billion in revenue, surpassing the consensus estimate of $3.51 billion and reflecting continued strong performance of the current z16 mainframe.
During the quarter, IBM revealed plans to acquire HashiCorp in a deal valued at $6.4 billion. The company also announced that Palo Alto Networks will purchase IBM’s QRadar cloud software and transition customers to its Cortex Xsiam product. Additionally, IBM disclosed plans to expand its data center infrastructure in Montreal.
Despite the recent uptick, IBM shares have risen 14% year-to-date, aligning with the broader S&P 500 performance.