IBM records biggest sales growth in 10 years due to cloud demand

New York-based technology company Armonk said in a statement Monday that sales rose 6.5% to $16.7 billion in the three months ended December 31. This was the biggest increase in at least 10 years. Analysts were expecting an average of $16 billion, according to data compiled by Bloomberg. The stock jumped 7.5% in extended trading before posting higher gains.

“This is the start of the new IBM and we look forward to what we see,” Chief Financial Officer Jim Kavanaugh said in an interview. “We saw a very healthy acceleration in cloud and consulting which are key growth areas.”

IBM’s software arm, the largest trading conglomerate, rose 8.2% to $7.3 billion. The consulting unit, formerly known as Global Business Services, reported $4.7 billion in revenue, a 13% increase over the previous year.

The results were the first after IBM in November completed the spinoff of a large part of its legacy infrastructure services unit into a new company called Kindle, which includes service operations such as managing client data centers and traditional information-technology support. The disinvestment marked IBM’s fourth major transformation and is a significant step in Chief Executive Officer Arvind Krishna’s plan to transform Big Blue into cloud and artificial intelligence.

Hybrid-cloud revenue rose 16% to $6.2 billion due to the sale of Red Hat, a 19% increase during the quarter.

Krishna’s strategy to bring IBM into the fast-growing cloud-computing market, which has traditionally focused on mainframe computers and information-technology services, helped revive sales after years of steady revenue growth. However, even as companies move much of their operations to the Internet, IBM faces competition in cloud services from giants such as Microsoft Corp. and Amazon.com Inc. IBM is trying to differentiate itself from its larger rivals in the cloud by offering a hybrid model, which helps customers store and compute data in on-premises infrastructure, private cloud services, and servers run by public providers. does.

“In the past, IBM benefited from not being able to integrate easily with systems, but the cloud has changed that,” said Morningstar analyst Julie Bhusal Sharma. “The pandemic caused companies to start migrating workloads to the cloud and since they’re doing the switch anyway, they’re going for best-in-class providers.”

Even before taking over as CEO at the peak of the pandemic, Krishna was instrumental in developing IBM’s hybrid-cloud strategy and oversaw the $33 billion acquisition of Red Hat. This month, IBM sold a portion of its Watson Health business to private equity firm Francisco Partners, bringing back the technology company’s once-lofty ambitions in health care.

Regarding any other major changes to the company’s structure after Kindrell, Krishna said that IBM “has done the heavy lifting we needed and I think we have the right portfolio.”

IBM forecasts mid-single digit revenue growth in 2022 with incremental sales boost to Kindrill of about 3%. “Their guidance points to growth of around 7% to 8%, which isn’t bad for them. Still, they’re going to have tough comparisons in the second half of the year,” said Bloomberg Intelligence analyst Anurag Rana.

Earnings excluding certain costs were $3.35 per share, well above the average analyst estimate of $3.23. Gross margin was 56.9%, beating analysts’ estimated 56.1%.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.