IBM beats Wall Street estimates for Q1 profits signaling increased demand
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IBM Corp has surpassed the expectations of Wall Street for the profits of the first quarter of 2023. The company’s financial results show an increased demand for IT services and that the industry was performing better than expected. IBM’s positive results sent the company’s shares soaring.
IBM beats Wall Street expectations
IBM shares have increased by 0.40% in the last 24 hours. The share increase comes amid investor confidence in the company after posting solid results for the first three months of 2023.
IBM’s software and consulting businesses increased by 6% and 8.2%, respectively, at constant currency during the year’s first three months. The growth in these businesses was in line with the company’s estimates. However, Big Blue reiterated that the company’s full-year free cash flow forecast was $10.5 billion.
Analysts have shared positive remarks over the Q1 2023 numbers reported by IBM. According to analysts, there was a sign of relief with these quarterly numbers as they were better than what was originally feared.
The IT sector is currently witnessing a slowdown after a significant surge in demand for services after the end of the pandemic. Some services that have witnessed the most demand are consulting because the high inflation levels and interest rates have forced consumers to trim their spending.
Interest in digital transformation projects
The growth witnessed at IBM’s consulting and software business has also slowed down from the mid-to-high teens reported last year. The Chief Executive Officer at IBM, Arvind Krishna, commented on this development saying that clients were becoming more interested in digital transformation projects.
According to the analyst, investors were becoming more interested in cost-takeout productivity and quick returns. These sentiments are similar to the ones made by executives at Accenture last month.
IBM trimmed its full-year consulting revenue growth forecast to 6% and 8% from the earlier expectations of high single-digit percentage growth. The company also forecasted that the annual revenue growth would range between 3% and 5% at constant currency.
In January, the company had predicted that the revenue would increase at a rate equivalent to the lower end of the mid-single-digit estimate. On average, analysts anticipate a 3.5% growth, according to data from Refinitiv.
According to analysts, IBM is uniquely positioned to overcome a drop in corporate IT spending. IBM also has less exposure to regional banks in the US, and it is less vulnerable to the banking crisis in the country.
The Chief Financial Officer at IBM, James Kavanaugh, commented on the development saying that regional banks accounted for less than 1% of the company’s revenues in the US. The total revenues reported by the company in Q1 increased by 4.4% at constant currency to $14.25 billion. This was slightly lower than the analysts’ estimate of $14.35 billion. The company’s reported earnings of $1.36 per share also surpassed estimates.
