IBM soars as high as 7% after blowing away Wall Street expectations and showing annual revenue growth for the first time since 2011

IBM CEO Ginni Rometty IBM
  • IBM’s stock rose as high as 7% on Tuesday after announcing earnings that beat Wall Street expectations on the top and bottom lines.
  • IBM also posted positive revenue growth in 2018 – the first time it’s done so since 2017.
  • Its quarterly revenue slipped some 3% from this time last year, but it was still ahead of expectations.

IBM’s stock soared as high as 7% after announcing earnings that blew away Wall Street expectations on the top and bottom lines. At $US21.76 billion, IBM’s quarterly revenues slipped some 3% from the year-ago quarter, but still stayed ahead of analyst expectations.

Here’s what IBM reported:

  • Revenue of $US21.76 billion. Wall Street was looking for $US21.75 billion.
  • EPS of $US4.87/share. Analysts were expecting $US4.84 a share.

There was more good news for IBM, besides: In 2018, its full-year revenue grew 1%, to $US79.86 billion – marking the first time IBM has seen annual revenue growth since 2011.

“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics and security,” IBM CEO Ginni Rometty said in a statement.

The company’s revenues for the quarter were bolstered by 4% revenue growth, to $US4.3 billion, in its Global Business Services unit compared to the year-ago period. Global Business Services includes IBM’s consulting, application management and global process services businesses. That unit was the only one to see revenue growth during the quarter.

IBM’s Technology Services & Cloud Platforms, Systems and Global Financing businesses were down, while Cognitive Solutions – the segment that includes its AI platforms, including IBM Watson, as well as certain database products – was flat at $US5.5 billion.

IBM stock was down 36% in 2018, but the company is betting that its forthcoming acquisition of Red Hat for $US34 billion in the second half of 2019 will put it in a better position for turning things around.

“The client response [to acquiring Red Hat] has been overwhelmingly positive,” James Kavanaugh, IBM senior vice president and chief financial officer, said during the earnings call. “They understand the power of this acquisition….In addition to the growing Red Hat business, we see the opportunity to lift all of IBM.”