Trending Articles
Trending Topics
Trending
IBM has published its latest set of financial results, unveiling a burgeoning artificial intelligence order book and continuing growth in its Red Hat business.
The results covered the fourth quarter of the 2024 calendar year, which saw it notch up revenue of $17.6 billion – a rise of 2% in constant currency compared to the corresponding quarter last year.
The results were received enthusiastically by the stock market, with the company announcing a spike in free cash flow – the amount of money left over when capital and operating expenses have been paid – to $12.7 billion. It is IBM” ‘s “strongest level of free cash flow generation in many years and our highest reported free cash flow margin in history,” CEO Arvind Krishna told an earnings call.
Software was the standout segment for the company over the quarter, with software revenue growing 9% in constant currency year on year to reach nearly $8 billion. Software now accounts for around 45% of IBM’s business, Krishna said.
Red Hat, which IBM acquired in 2019, saw the largest year-on-year growth of all its software units, with revenue up 17% in constant currency. The growth is being driven by more spending on hybrid cloud offerings, including OpenShift and Ansible, according to Jim Kavanaugh, IBM’s CFO.
Elsewhere in software, automation grew 16%, transaction processing 11%, while both security and data & AI delivered 5% growth each.
Krishna highlighted the growing importance of generative AI to IBM’s bottom line: the company saw $1.5 billion of new bookings over the quarter, thanks to increased interest in the likes of Concert and Big Blue’s AI assistants.
Infrastructure revenue took a tumble over the quarter, however, falling by 6% in constant currency. The drop was “reflecting product cycle dynamics in our 11th quarter of z16”, Kavanaugh told the earnings call. IBM is planning to launch its next generation of mainframes, the z17, later this year.
Consulting revenue was down 1% in constant currency year on year. Kavanaugh attributed the drop to a change in business focus among customers: “we have operated in a dynamic macroeconomic environment. We continue to see clients reprioritizing their IT spending towards digital transformation and AI initiatives for cost optimization and operational efficiency,” he said.
Kavanaugh revealed that the company spent over $3 billion on acquisitions during 2024.
Its $6.4 billion buyout of cloud infrastructure company HashiCorp, which was supposed to close before the end of 2024, has been delayed due to an investigation by the UK’s competition watchdog, the Competition and Markets Authority.
Expect IBM to keep reaching for its chequebook in 2025, however: “M&A [mergers and acquisition] remains a key enabler of our strategy,” Krishna said.
