IBM raises annual software revenue outlook

IBM finance chief James Kavanaugh on Wednesday said delayed software deals that rattled investors in the last quarter were beginning to close, as the company lifted its forecast for the business and reported better-than-expected third-quarter earnings.

In an interview with Reuters, Kavanaugh said IBM now expects annual software revenue growth of about 7 per cent to 8 per cent, up from 6 per cent to 8 per cent previously.

Third-quarter revenue rose 4.7 per cent to US$17.10-billion, above analysts’ average estimate of US$16.82-billion, according to data compiled by LSEG.

Adjusted profit came in at US$2.95 per share, beating estimates of US$2.86 per share.

IBM cuts annual revenue growth forecast, days after warning of shift to AI spending

CEO Arvind Krishna had said in July that IBM had “faltered” in adapting to a shift in customer spending from software to data-centre infrastructure, triggering its steepest one-day share drop in over a century.

Software revenue rose 8.3 per cent to US$7.80-billion in the third quarter, topping estimates of US$7.62-billion.

Within the segment, sales in its hybrid cloud unit grew 11 per cent and transaction processing software revenue rose 9 per cent, rebounding from an unexpected decline last quarter.

Kavanaugh said about 25 per cent of the transaction processing revenue came from deals deferred from the second quarter and “the remaining 75 per cent is net new business.”

Infrastructure revenue rose 4.2 per cent to US$3.71-billion, as 31 per cent growth in distributed infrastructure, which includes servers and storage systems, helped offset weakness in its Z mainframe business.