After the market closed Wednesday, International Business Machines Corp. (NYSE: IBM) reported better-than-anticipated fiscal 2024 second-quarter earnings and revenues. The company also upwardly revised its FY 2024 free cash flow outlook. The stock of IBM ended Thursday’s trading session at $184, almost flat from the prior close. The stock of IBM ended Thursday’s trading session at $191.98, up $7.96, or 4.33%, from the prior close.
The Armonk, New York-based Company reported second-quarter revenues of $15.77 billion, an increase of 1.90% from $15.48 billion in the similar quarter of fiscal 2023.
For the second quarter, which ended on June 30, 2024, IBM posted net income of $1.83 billion, or $1.96 per share, compared with $1.58 billion, or $1.72 per share, in the second quarter that ended on June 30, 2023.
Excluding other charges, the company recorded 2Q 2024 non-GAAP net income of $2.27 billion, or $2.43 per share, compared with $2 billion, or $2.18 per share, in 2Q 2023.
Analysts surveyed by LSEG anticipated IBM to report earnings of $2.20 per share on revenues of $15.62 billion.
Commenting on the results, IBM Chairman and CEO, Arvind Krishna, stated “We had a strong second quarter, exceeding our expectations, driven by growth in both revenue and free cash flow. We continue to see that clients turn to IBM for our technology and our expertise in enterprise AI, and our book of business for generative AI has grown to more than two billion dollars since the launch of Watsonx one year ago”
Segment wise:
- Software revenues raised by 7% y-o-y to $6.74 billion, surpassing StreetAccount estimates of $6.49 billion.
- Consulting revenues were $5.18 billion, a decline of 0.90% from last year and missing the StreetAccount consensus of $5.23 billion.
- Infrastructure revenues inched up 0.80% y-o-y to $3.65 billion, surpassing forecasts of $3.51 billion.
- Finance revenues were $169 million in 2Q 2024, down from $185 million in 2Q 2023.
IBM’s finance chief, Jim Kavanaugh, noted that the revenue generated by the prevailing z16 mainframe computer continues to exceed that of previous cycles. According to CEO Arvind Krishna, the company’s business in generative AI (artificial intelligence) has now surpassed $2 billion, up from over $1 billion reported in April.
Looking ahead, IBM now forecasts FY 2024 free cash flow to be over $12 billion, an upward revision from April guidance of roughly $12 billion.
During the second quarter, IBM revealed its intention to take over HashiCorp in a transaction valued at $6.4 billion. Additionally, IBM disclosed that Palo Alto Networks had accepted to purchase IBM’s QRadar cloud software and transition its clients to the Cortex XSIAM product. Furthermore, IBM unveiled a strategy to expand its data center framework in Montreal.
The quarterly earnings beat and upward revision of the FY 2024 free cash flow outlook are expected to keep IBM’s stock slightly bullish in the short term.
The historical price chart indicates that the stock of IBM has broken the ascending triangle formation. The base of the ascending triangle is now expected to act as support. Additionally, the stock is trading above its 50-day moving average, while the stochastic oscillator is in the bullish zone. Therefore, we anticipate IBM’s stock to remain in an uptrend in the near term.
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