Photo Credit: Mikita Yo on Unsplash
 

IBM (NYSE: IBM) recently announced strong results for its fourth quarter that sent the stock climbing 7% in the after-hours trading session.
 

IBM’s Financials

Revenues for the quarter grew 4% to $17.4 billion, surpassing Street’s estimates of $17.3 billion. Adjusted earnings of $3.87 per share were significantly ahead of the analyst estimates of $3.79.

By segment, revenues from Software that includes Hybrid Platform & Solutions and Transaction Processing grew 3% to $7.5 billion, falling short of the market’s forecast of $7.67 billion. Revenue from Consulting including Business Transformation, Technology Consulting, and Application Operations grew 6% to $5 billion, again missing the market’s estimated $5.1 billion. Revenue from Infrastructure including Hybrid Infrastructure and Infrastructure Support fell 3% to $4.6 billion, ahead of the Street’s forecast of $4.3 billion. Financing revenues grew 2% to $0.2 billion.

IBM’s annual reveunue grew 2% to $61.9 billion. It also exceeded its 2023 objective of generating $10.5 billion in free cash flow and reported $11.2 billion in cash generated for the year.

IBM expects revenues to grow in mid-single digits for the current year. It expects about $12 billion in free cash flow for the year. Analysts expect IBM to end the year with $63.5 billion in revenue or a 3% growth and a net income of $9.6 billion.
 

IBM’s Acquisition

Last quarter, IBM announced the acquisition of StreamSets and webMethods, Software AG’s Super iPaaS (integration platform-as-a-service) enterprise technology platforms, for €2.13 billion (~$2.3 billion). Both StreamSets and webMethods are part of Software AG, a French player where Silver Lake is a majority owner. 

StreamSets is a cloud-native DataOps and data ingestion platform that provides enterprises with the ability to deliver consistent access and data across a wide spectrum of data sources and types. It helps in the design of smart data pipelines and the ingestion of real-time and batch data. 

webMethods is an integration and API management platform that can be deployed both on-prem and in the cloud. It provides organizations with B2B integration capabilities along with access to a managed file transfer system. It provides a modern API gateway to manage, monitor, and monetize APIs.

IBM plans to integrate these two solutions with Watsonx AI and data platform as well as application modernization, data fabric, and IT automation products. The integration will help clients leverage their applications and data better and drive innovation while preparing businesses for AI.

Analysts believe that IBM is still to see the full potential of its AI capabilities. During the last quarter, its AI book of business doubled over the quarter. Some estimate that its AI orders are $500 million, with most of it being booked within the consulting segment. The AI revenues are expected to grow at a faster pace in the current quarter.

The positive view has sent the stock soaring. It is currently trading at $189.85 with a market capitalization of $173 billion. It touched a ten-year high of $196.90 the day after results announcement. It has recovered from the 52-week low of $120.55 that it was trading at in May 2023.

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