Revenues climb at IBM but vendor warns of currency rates impact

Software and infrastructure sales grew 6.4 per cent and 19 per cent respectively

IBM saw revenues climb nine per cent to $15.5bn in its second quarter, thanks to a fast growing infrastructure business.

Sales jumped 16 per cent on a constant currency basis, including around five points from sales to spin-off company Kyndryl, while pre-tax income stood at $1.7bn on a GAAP basis.

On a non-GAAP basis, pre-tax income was $2.5bn, up 48 per cent year-on-year, and operating non-GAAP diluted earnings per share was $2.31 - up 43 per cent.

"In the second quarter, we drove solid results reflecting the investments and changes we have been making to execute our strategy," CEO Arvind Krishna said on the company's earnings call.

"With this performance, we continue to deliver on our model of mid-single-digit revenue growth. Technology plays an important role in today's business environment.

"With this demand backdrop, we are executing our hybrid cloud and AI strategy. We have made changes to our portfolio and focused investments in our offerings, technical talent, our ecosystem, and go-to-market model."

Software sales were up 6.4 per cent for the quarter to $6.2bn, with Red Hat up 12 per cent and hybrid cloud revenue increasing by 14 per cent.

Revenue for the company's infrastructure segment saw the biggest increase at 19 per cent to $4.2bn.

And revenues for the vendor's consulting business reached $4.8bn, an increase of 9.8 per cent year-on-year, with its technology consulting group reporting growth of 14 per cent.

"With the z16 platform launch, our infrastructure business had a good quarter," Krishna added.

"By integrating technology and expertise from IBM and our partners, our clients will continue to see our hybrid cloud and AI solutions as a crucial source of business opportunity and growth."

But shares fell by about six per cent in early trading on Tuesday after the company lowered its forecasts for free cash flow due to the impact of a strong dollar and the loss of business in Russia.

On the earnings call, CFO and senior vice-president James Kavanaugh said: "The velocity of the strengthening is the sharpest that we've seen in over a decade.

"And it's been a broad-based dollar story, as you all know. All the currencies we hedge, over half of them are down double digits against the U.S. dollar this year. So, it's, I would say, unprecedented in what we've seen in the rate, the breadth of magnitude."