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IBM is confident that it can achieve revenue growth for the full year, CEO Arvind Krishna said.
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IBM
achieved better results than the expected financial quarter in the first quarter and reiterates its forecast that revenue from 2021 will increase from 2020.
Shares of IBM (ticker: IBM) rose 4.5% to $ 138.92 with name trading.
The business computer giant generated revenue of $ 17.7 billion for the quarter, up 1% but up 2% on a constant currency basis, and down the street at $ 17.3 billion. Non-GAAP earnings were $ 1.77 per share, ahead of the Street Consensus forecast of $ 1.63 per share. This compares with revenue of $ 17.6 billion and a non-GAAP earnings of $ 1.84 per share in the previous quarter. On a GAAP basis, the company earned $ 1.06 per share, compared to $ 1.31 per share a year ago.
“Strong quarterly performance in cloud, driven by increasing customer adoption of our hybrid cloud platform, and growth in software and advice enabled us to get off to a good start for the year,” said CEO Arvind Krishna , said in a statement. “While we have more work to do, we are confident that we will be able to generate revenue for the full year and reach our adjusted free cash flow target in 2021.”
The company says revenue in its cloud and cognitive software segment was $ 5.4 billion, up 3.8%, or 0.8%, if currency adjusted. Global Business Services segment revenue was $ 4.2 billion, up 2.4%, but up 1.4%, adjusted for currency.
Global technology services revenue was $ 6.4 billion, down 1.5%, or 5.3% adjusted for currency. System revenue, which includes hardware, was $ 1.4 billion, up 4.3%, or 2.2% on a currency-adjusted basis. Global financing income was $ 240 million, 20% lower, or 21.9%, adjusted for currency.
Total cloud revenue was $ 6.5 billion, an increase of 21%, or 18%, adjusted for currency and sales enterprises. Red Hat revenue increased by 17%, or 15% adjusted for currency.
The gross margin in the first quarter was 47.3% on a non-GAAP basis, with 110 basis points, or 46.3% on a GAAP basis, with 120 basis points.
IBM said it had paid off $ 5.1 billion in debt since the end of 2020, reducing its total debt to $ 56.4 billion. IBM has paid off $ 16.6 billion in debt since the 2019 Red Hat acquisition in 2019.
IBM reiterates its previous forecast for the full year 2021 adjusted free cash flow from $ 11 billion to $ 12 billion, with revenue before 2020 levels. The company is still expecting sustainable single-digit growth once it has completed the ongoing turnaround of Kyndryl, its management service business. The company has not given any new details about the turnaround, but still expects the transaction to be completed by the end of 2021.
CFO James Kavanaugh noted in an interview with Barron’s revenue for the quarter was approximately $ 400 million higher than Street’s expectations, with a broad power in hardware, software and services. He pointed out that the company’s cloud business revenue was $ 26 billion over the past twelve months and now accounts for more than a third of IBM’s business.
Kavanaugh said IBM expects to file a Form 10 filing with the Securities and Exchange Commission in mid to late summer in which the income statements and balance sheets after the turnaround on a pro forma basis for both Kyndryl and ” stayingco ” is set out. He expects the first earnings quarter for Kyndryl as an independent company in the first quarter of 2022. He said he expects Kyndryl to envisage an investment grade rating with an ‘attractive’ dividend and free cash flow return.
Asked about the tone of business given the high expectations for IT spending for businesses, Kavanaugh said that ‘we are generally encouraged by the trends we see from a macroeconomic perspective’, although he noted that ‘trends worldwide are not homogeneous’. He said there is a correlation between pandemic curves in different markets and customer buying behavior. “We are cautiously optimistic,” he said.
Write to Eric J. Savitz at [email protected]