4Q23 results and FY24F revenue guidance are inline
- 4Q23 normalized net income of US3.6bn (+77% q-o-q, +8.8% y-o-y) and revenue of US$17.4bn (+17.8% q-o-q, +4.1% y-o-y) were inline with consensus projections
- IBM identifies hybrid cloud and Consulting segments as key growth drivers; plans to continue investment in Software segment innovations.
- IBM expects FY24F revenue to grow by mid-single digit, where the guidance is inline with consensus expectations
4Q23 (Dec YE) normalized net income of US$3.6bn (+77% q-o-q, +8.8% y-o-y) was inline. IBM reported normalized net income of US$3.6bn (+77% q-o-q, +8.8% y-o-y) meeting consensus expectations. IBM normalized net income margin in 4Q23 stood at 20.6% (13.8% in 3Q23 and 19.7% in 4Q22). The q-o-q normalized net income margin improvement was due to higher growth in revenue and ongoing productivity initiatives such as streamlining of supply chain, simplifying infrastructure environments, and aligning team workflows. IBM’s revenue of US$17.4bn (+18% q-o-q, +4.1% y-o-y) was inline with consensus estimates. Software revenue of US$7.5bn was up by 20% q-o-q (up 3.1% y-o-y), driven by hybrid cloud and transaction processing businesses. Consulting segment reported revenue of US$5.0bn (+1.7% q-o-q, +5.8% y-o-y), led by data and technology transformations, including AI and analytics-focused projects. Infrastructure segment was up 40.7% q-o-q (up 2.7% y-o-y) on growth in hybrid and distributed infrastructure businesses. IBM reports a 17% q-o-q increase in annual bookings for its hybrid cloud approach, with notable growth in Red Hat Enterprise Linux (RHEL), OpenShift, and Ansible. IBM focuses on automation and generative AI (GenAI), and has introduced Watsonx and Granite models. Few client examples include NatWest, Lockheed Martin, and Sevilla Fútbol Club.
FY24F revenue guidance inline with consensus. IBM projects FY24F revenue to grow by mid-single digit y-o-y, where the management guidance is inline with consensus expectations. Software and Consulting are expected to be the key growth drivers which contributed 72% to the total revenue in 4Q23. IBM expects Software revenue to grow by high mid-single digit and Consulting in the 6%-8% range, where both the segments’ revenue projections are in inline with consensus expectations. IBM expects free cash flow in FY24F to hover at US$12.0bn, meeting consensus expectations of US$11.7bn.