International Business Machines (IBM) reported fourth-quarter results that exceeded analysts' expectations, driving a surge in its stock price. The company posted adjusted earnings per share of $3.92, surpassing the anticipated $3.78, while revenue rose 2% on a constant currency basis to $17.56 billion, aligning with consensus estimates. A key driver of the positive sentiment was IBM's strong forecast for 2025, with CEO Arvind Krishna projecting revenue growth to exceed 5% and free cash flow to reach approximately $13 billion. The performance of IBM's Red Hat subsidiary, which grew 17% in the quarter, and the burgeoning artificial intelligence business, with bookings now over $5 billion, were significant contributors to the upbeat outlook.
IBM's strategic shift towards software and consulting, along with its focus on artificial intelligence, has been well-received by investors. The software segment saw an 11% increase in revenue, while the AI strategy, which includes a $2 billion order pipeline, further bolstered investor confidence. Despite a decline in consulting and infrastructure revenues, the company concluded the year with its highest-ever recorded signings quarter, up 23%, indicating strong future prospects. CFO James Kavanaugh highlighted the long-term growth potential of generative AI, which is expected to drive consulting and software revenues.
IBM shares are up 8.19% to $247.35 as of January 30th, following a previous close of $228.63.