IBM Revenue Beats - Cuts 3,900 Jobs

January 26, 2023

IBM reported fourth-quarter 2022 earnings results. The firm had earnings of $3.60 per share, adjusted with $3.60 per share expected. Revenue came in at $16.69 billion with $16.4 billion expected. Wall street was looking for expected IBM’s total revenue to fall for the first time in two years, but it was flat. IBM's net income rose 16% to $2.71 billion.

Big Blue plans to cut 3,900 jobs, representing 1.5% of IBM’s workforce.

"Our solid fourth-quarter performance capped a year in which we grew revenue above our mid-single digit model. Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today's business environment," said Arvind Krishna, IBM chairman and chief executive officer. "Looking ahead to 2023, we expect full-year revenue growth consistent with our mid-single digit model."

"IBM's revenue growth and operating profit in 2022 demonstrate the strength and multiplier effect of our platform-centric approach to hybrid cloud and AI," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our client-focused portfolio and strong recurring revenue stream position IBM well for continued growth, solid cash generation and returning value to shareholders through dividends."

Segment Results for Fourth Quarter

• Software (includes Hybrid Platform & Solutions, Transaction Processing)— revenues of $7.3 billion, up 2.8 percent, up 8.0 percent at constant currency:
  - Hybrid Platform & Solutions up 5 percent, up 10 percent at constant currency:
        -- Red Hat up 10 percent, up 15 percent at constant currency
        -- Automation up 4 percent, up 9 percent at constant currency
        -- Data & AI up 4 percent, up 8 percent at constant currency
        -- Security up 4 percent, up 10 percent at constant currency
  - Transaction Processing down 3 percent, up 3 percent at constant currency
   
• Consulting (includes Business Transformation, Technology Consulting and Application Operations)— revenues of $4.8 billion, up 0.5 percent, up 9.3 percent at constant currency:
  - Business Transformation down 1 percent, up 7 percent at constant currency
  - Technology Consulting up 1 percent, up 10 percent at constant currency
  - Application Operations up 2 percent, up 12 percent at constant currency
   
• Infrastructure (includes Hybrid Infrastructure, Infrastructure Support)— revenues of $4.5 billion, up 1.6 percent, up 7.4 percent at constant currency:
  - Hybrid Infrastructure up 6 percent, up 11 percent at constant currency:
        -- IBM z Systems up 16 percent, up 21 percent at constant currency
        -- Distributed Infrastructure flat, up 5 percent at constant currency
  - Infrastructure Support down 8 percent, flat at constant currency
   
• Financing (includes client and commercial financing)— revenues of $0.2 billion, down 0.4 percent, up 3.9 percent at constant currency

IBM ended the fourth quarter with $8.8 billion of cash on hand (which includes marketable securities), up $1.3 billion from year-end 2021. Debt, including IBM Financing debt of $12.9 billion, totaled $50.9 billion, down $0.8 billion since the end of 2021.

Full-Year 2023 Expectations

•Revenue Growth: The company expects constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be neutral to a one-point tailwind to revenue growth.

•Free Cash Flow: The company expects about $10.5 billion in consolidated free cash flow, up more than $1 billion year to year.

In 2021, IBM made a goal of delivering $35 billion in free cash flow between 2022 and 2024, and in 2022 free cash flow totaled $9.29 billion.