IBM in its earnings report said it reported $15 billion in revenue (up 1 percent) in Q3 2024, indicating that its AI strategy is nor working well.
Software revenue grew 10 percent, while Consulting remained flat, and Infrastructure declined 7 percent.
IBM’s generative AI business surged, now valued at over $3 billion, up more than $1 billion compared to the previous quarter.
Software revenues reached $6.5 billion, up 9.7 percent.
Hybrid Platform & Solutions grew 10 percent, with Red Hat up 14 percent and Automation up 13 percent.
Data & AI increased by 5 percent, while Security declined 1 percent.
Consulting Segment revenues were $5.2 billion, down 0.5 percent.
Business Transformation grew by 2 percent, but Technology Consulting fell by 4 percent.
Infrastructure Segment revenues dropped to $3.0 billion, down 7 percent.
Hybrid Infrastructure fell by 9 percent, with IBM Z down 19 percent and Distributed Infrastructure down 3 percent.
IBM expects revenue growth in Q4 to align with Q3 and remains confident in delivering $12 billion in free cash flow for the full year, driven by growth in operating margins.
IBM’s emphasis on hybrid cloud and AI has led to significant growth in its software segment, now accounting for nearly 45 percent of total revenue, up from the high 20s in 2018.
IBM CFO Jim Kavanaugh highlighted IBM’s progress in generative AI (Gen AI), noting strong initial traction in building a Gen AI book of business. While these projects have longer durations and lower immediate revenue, they are expected to fuel growth in 2025.
IBM anticipates continued profit margin expansion driven by productivity initiatives and a focus on a high-value portfolio mix.
CEO Arvind Krishna reiterated IBM’s M&A focus on areas like hybrid cloud, automation, and data and AI, emphasizing the importance of aligning acquisitions with IBM’s existing strategy to strengthen synergies.
While the consulting market remains dynamic, IBM is positioning itself as a strategic provider in Gen AI, aligning with its broader goals in hybrid cloud and AI.
These developments reflect IBM’s continued focus on evolving its business towards AI and hybrid cloud, positioning itself for future growth, especially in the emerging Gen AI market.
Baburajan Kizhakedath
