IBM posts drop in Q2 revenue reflecting tougher IT spending

IBM has reported 0.4 percent drop in revenue to $15.5 billion with net profit of $1.6 billion (+8 percent) during the second quarter of 2023.
IBM’s financial performance indicates that enterprise CIOs are not enhancing their IT spending in the wake of slowdown in their business.

IBM generated revenue of $6.6 billion (+7.2 percent) from Software; $5 billion (+4.3 percent) from Consulting; $3.6 billion (–14.6 percent) from Infrastructure and $0.2 billion (+26.2 percent) from Financing in Q2 2023.

IBM Segment Results

Software — revenues of $6.6 billion, up 7.2 percent
— Hybrid Platform & Solutions up 6 percent
— Red Hat up 11 percent
— Automation up 1 percent
— Data & AI up 10 percent
— Security down 2 percent
— Transaction Processing up 9 percent

Consulting — revenues of $5.0 billion, up 4.3 percent
—  Business Transformation up 3 percent
—  Technology Consulting up 4 percent
—  Application Operations up 6 percent

Infrastructure — revenues of $3.6 billion, down 14.6 percent
—  Hybrid Infrastructure down 18 percent
—  IBM z Systems down 30 percent
—  Distributed Infrastructure down 6 percent
—  Infrastructure Support down 8 percent

BM reported the top line of its business that houses the mainframe computers shrank by 14.6 percent.

Growth in RedHat software and consulting segment slowed likely due to a tougher IT spending environment, said Wedbush Securities analyst Moshe Katri.

IBM expects constant currency revenue growth of three percent to five percent in 2023.

IBM has joined tech firms in boosting its artificial intelligence offerings, launching a platform, watsonx, in May to help companies integrate generative AI into their products and services after chatbot ChatGPT’s stellar success.

Analysts expect watsonx to aid the software business, which grew 7.2 percent to $6.6 billion during the reported quarter, thanks to enterprise digitization projects.

“We continue to respond to the needs of our clients who seek trusted, enterprise AI solutions, and we are excited about the response to the watsonx AI platform. We remain confident in our revenue and free cash flow growth expectations for the full year,” Arvind Krishna, IBM chairman and chief executive officer, said in its earnings report, said.

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