IBM’s Q3 23 growth driven by software and consulting

Arvind Krishna, IBM chairman and chief executive officer | IBM third-quarter

IBM has announced its third-quarter 2023 results with revenue totaling $14.8bn, an increase of 4.6 percent, up 3.5 percent at constant currency.

The company reported software revenues of $6.3bn, an increase of 7.8 percent, up 6.3 percent at constant currency. Consulting revenue also saw an increase of 5.6 percent, up five percent in constant currency, with reported revenue of $5bn.

James Kavanaugh, IBM senior vice president and CFO, said: “Our continued focus on the fundamentals of our business is driving solid revenue growth, profit margin expansion and strong cash generation.

“That cash generation has enabled us to increase our investment in R&D and acquisitions, strengthening our future AI and hybrid cloud capabilities, while supporting continued shareholder returns through our dividend.”

However, infrastructure revenue seems to have let the company down for another quarter with revenues of $3.3bn, down 2.4 percent and down 3.2 percent at constant currency.

Non-GAAP for the quarter was 15.6 percent, up 1.7 points and GAAP was 54.4 percent, up 1.7 points.

Year-to-date net cash from operating activities was $9.5bn for the company, an increase of $3bn and free cash flow was $5.1bn, up $1bn.

For FY23, the company expects constant currency revenue growth of three to five percent. At current foreign exchange rates, currency is expected to be about a one-point headwind to revenue growth. The company also expects around $10.5bn in free cash flow, up more than $1bn YoY.

In a conference call, Arvind Krishna, chairman and CEO, IBM, said: “In the third quarter, we had solid growth across revenue, profit and free cash flow while delivering innovations and positioning our business to capture future opportunities. On the broader trends we are seeing in the market, technology continues to serve as a fundamental source of competitive advantage. Businesses and governments around the world are looking for opportunities to address demographic shifts, make the supply chains more resilient and improve sustainability.

“…Our overall growth reflects our ability to help clients leverage data and AI for competitive advantage, automate IT environments and seamlessly integrate hybrid cloud solutions. We also continue to position our business for the future, launching new products and offerings, forging and expanding key partnerships, investing in talent and skills and focusing our portfolio. We have been taking concrete actions to deliver productivity in our own business. All of this results in an IBM that is aligned to our clients’ most pressing needs and has a stronger financial profile.”

Big Blue has seen several key partnerships this quarter, some of which include; KPMG to help clients implement SAP S/4HANA in the energy and utilities industry; AWS to help more mutual clients operationalize and derive value from GenAI and EY which announced the launch of a HR solution, Workforce.