IBM exceeds revenue estimates, though sales are about the same as a year earlier

IBM shares edged higher in extended trading on Wednesday after the technology conglomerate reported revenue that topped analysts’ estimates.

Here’s how the company did:

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• Earnings: $3.60 per share, adjusted, vs. $3.60 per share as expected by analysts, according to Refinitiv.
• Revenue: $16.69 billion, vs. $16.4 billion as expected by analysts, according to Refinitiv.

Analysts had expected IBM’s total revenue to decline for the first time in two years, but it ended up being flat, according to a statement. Net income rose 16% to $2.71 billion.

IBM’s software segment posted $7.29 billion, which works out to nearly 3% growth and above the $7.12 billion consensus among analysts polled by StreetAccount.

The company picked up $4.77 billion in revenue from consulting, up 0.5% and slightly lower than the $4.8 billion consensus from StreetAccount.

IBM’s infrastructure segment generated $4.48 billion, up almost 2% and more than the $4.18 billion StreetAccount consensus. Revenue from IBM’s Z Systems line of mainframe computers jumped 16% after the Z16 model became generally available last May.

With respect to guidance, IBM called for 2023 revenue growth in constant currency and around $10.5 billion in free cash flow. In 2021, IBM announced a goal of delivering $35 billion in free cash flow between 2022 and 2024, and in 2022 free cash flow totaled $9.29 billion.

During the quarter, IBM revealed a plan to invest $20 billion in New York’s Hudson Valley area over the course of a decade. The company also announced a next-generation quantum computer featuring 433-qubits and the acquisition of Octo, one of a handful of consulting companies IBM has absorbed since spinning out its managed infrastructure services division as Kyndryl in 2021.

IBM outperformed its tech peers in 2022, the worst year for the Nasdaq since 2008. IBM rose 11% last year and was one of only two U.S. tech companies valued at $50 billion or more to notch gains. The other was VMware, which agreed in May to be acquired by Broadcom for $61 billion.

Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.

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