IBM shares soar as demand for artificial intelligence drives revenue growth

IBM(International Business Machines Corporation) reported that revenue grew 4% last quarter, in part due to demand for its artificial intelligence products and services and hybrid cloud. The computing giant also said free cash flow will improve this year.

Investors welcomed the news, with the stock closing more than 9% higher on Thursday, its best one-day gain in nearly four years.

“We’re seeing a significant increase in overall demand for generative artificial intelligence products,” IBM Chief Financial Officer James Kavanaugh said in an interview with Yahoo Finance. “We are engaging with thousands of customers. Our use cases and pilots have been launched” about five times. “

IBM’s fourth-quarter earnings per share were $3.87, beating Wall Street’s average estimate of $3.76, on revenue of $17.4 billion, which beat estimates of $17.29 billion.

Of particular interest to analysts and investors is the company’s free cash flow, which IBM forecasts will rise to about $12 billion this year from $11.2 billion in 2023. Revenue will grow by a mid-single-digit percentage, with software trends slightly higher than that, and Cavanaugh said the consulting business is expected to expand 6% to 8%.

IBM’s biggest growth last quarter came from its consulting business, with sales rising 5.8% to $5 billion, but lower than some analysts’ expectations. Its weakest link is the security of its software business, which shrank by 5%.

“Revenue grew in all our segments in the fourth quarter, driven by continued adoption of hybrid cloud and artificial intelligence products,” IBM CEO Arvind Krishna said in a statement. “Customer demand for artificial intelligence is growing. Accelerating growth, our business continues to grow.” From the third quarter to the fourth quarter, WatsonX and generative artificial intelligence roughly doubled. “

Kavanaugh said clients are using IBM’s generative artificial intelligence products to improve coding efficiency, enhance call center operations and improve the efficiency of digital workforces in financial operations and other areas. But he stressed it was still early.

“We’ve gone from experiments over the past few years to customers now starting to scale,” he said. “I think the curve is going to be a long curve. I think artificial intelligence is going to bring tremendous value.” The growth in revenue realization will be It starts to expand in ’24 and then you’re going to hit some inflection points in ’25 and beyond. “

After years of being range-bound, IBM shares have broken out, rising about 24% in the past 12 months to reach a nearly 10-year high.

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