IBM tops third-quarter estimates and lifts guidance, but stock drops

IBM has reported impressive third-quarter earnings that exceeded Wall Street's expectations, even as it raised its revenue forecast, attributing its success to the ongoing momentum in artificial intelligence. Despite these positive results, the company's stock fell by 5% in after-hours trading. The tech giant revealed a 9% increase in revenue, reaching approximately $15 billion compared to the same period last year. Net income surged to $1.74 billion, translating to $1.84 per share, a significant recovery from a loss of $330 million, or 36 cents per share, reported a year prior. The previous year's figures were impacted by a substantial $2.7 billion pension settlement charge. CEO Arvind Krishna emphasized the value clients are deriving from IBM’s technology and expertise, stating, "Clients globally continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI." This positive outlook has led IBM to revise its revenue growth forecast to “more than” 5%, an upgrade from the earlier guidance of “at least” 5%. Additionally, the company expects its free cash flow for the year to reach $14 billion, up from an earlier estimate of $13.5 billion. In terms of AI business, IBM reported a significant increase, with its AI-related revenues surpassing $9.5 billion, a rise from $7.5 billion in the previous quarter. The company has been leveraging AI to enhance productivity and reduce costs, with Krishna previously noting the elimination of 200 human resources positions to streamline operations. Furthermore, IBM's software revenue climbed by 10% to $7.21 billion, aligning with analyst estimates, while consulting revenue reached $5.3 billion, exceeding projections of $5.24 billion. Infrastructure revenue, which includes its mainframe computer segment, saw a notable 17% increase, totaling $3.6 billion. In a show of confidence, IBM's board also approved a quarterly dividend of $1.68 per share.