The key takeaways from IBM's Q1 results
We break out the key points from IBM's latest quarterly report
IBM has revealed its "solid" start to 2022, with the technology giant having posted revenue of $14.2bn so far this year.
Big Blue has posted its first quarter financial results for 2022, with revenue so far up 11 per cent at a constant currency.
It also revealed that it has posted $1.5bn of operating pre-tax income.
In this article we look at some of the key takeaways from the financial results posted by IBM.
IBM impresses Wall Street
IBM shares rose almost by three per cent in trading after hours on Tuesday, with the tech giant reporting better than expected first quarter results.
Wall Street analysts had predicted IBM to earn $1.39 a share, on sales of $13.84bn.
But IBM exceeded that, having reported $1.40 a share on $14.2bn in revenue in the first three months of the year.
Arvind Krishna, chairman and chief executive officer, said "We are off to a solid start for the year, and we now see revenue growth for 2022 at the high end of our model."
He was also quoted by Seeking Alpha as saying IBM's performance this quarter "reflects the actions we have been taking".
He added: "We have strengthened our portfolio, we are leveraging our ecosystem and we are streamlining our business. While I acknowledge there is always more to do, we are pleased with the start to the year."
IBM's Hybrid pivot pays dividends
Last year Big Blue spun out its $19bn services business into a new company - Kyndryl - as part of a strategy aimed at putting more emphasis on software and consulting.
Six months on, IBM's strategy has paid off for investors with the vendor logging better than expected results in its first two quarters following the divestment.
The lion's share of sales in Q1 were brought in by IBM's Software and Consulting business units.
Software revenue during the first quarter rose 12.3 per cent from a year ago to $5.8bn, whilst consulting revenue saw a 13.3 per cent increase to $4.8bn.
Krishna said demand for hybrid cloud artificial intelligence led the growth in the company's software and consulting services and show that IBM has become "a more focused business."
Figures show that hybrid cloud revenue topped $5bn in the first quarter, up 14 per cent, whilst revenue from Red Hat jumped by 18 per cent.
Krishna was quoted by Seeking Alpha as saying the first quarter results "reflect the changes we have made to position our business for the future".
He added: "Harnessing the power of technology such as Hybrid Cloud and AI remains essential as our clients face a number of strategic challenges and opportunities, whether it's competing for talent, supply chain issues, inflation, cybersecurity or geopolitical instability.
"We continue to see a strong demand environment for both technology and consulting, as we help our clients respond to these issues. Over the last two years, we have been optimizing our portfolio, expanding our ecosystem, and simplifying our go-to-market to capture this demand."
Infrastructure revenue went down
It was a different story for IBM's infrastructure business.
Q1 revenue from infrastructure reached $3.2bn, down 2.3 per cent year on year.
Figures show that its hybrid infrastructure dropped two per cent at a constant currency, whilst zSystems revenue was down 18 per cent.
However, infrastructure support was up four per cent whilst distributed infrastructure delivered eight per cent revenue growth this quarter.
Speaking to investors, IBM CFO Jim Kavanaugh said: "Our infrastructure revenue performance, as always, reflects product cycle dynamics. This year, we would expect performance above the model, given the launch of our z16 late in the second quarter.
"This will contribute to second quarter performance and ramp further in the second half."