IBM results in line with expectations with conservative guidance. Stock decline 6% after-hours

IBM announced solid Q1 2024 results, but the stock is down in after-hours trading. While the decline isn't as severe as Meta's, it's likely due to conservative expectations for the future. The company is guiding for single-digit revenue growth. Shares are down about 6% in after-hours trading.

Key takeaways:

• Revenue: $14.46 billion (up 1% YoY, 3% at constant currency) - in line with market expectations ($14.25 billion)
• Earnings per share (EPS): $1.68 (above expectations: $1.59)
• Software revenue: $5.90 billion (up 5%, 6% at constant currency)
• Consulting revenue: $5.19 billion (up slightly, 2% at constant currency)
• Free cash flow: $1.91 billion (up $0.6 billion)
• Margins: Strong margin improvement (GAAP gross margin: 53.5%, Non-GAAP operating margin: 54.7%)
• Full-year guidance: Maintaining revenue in the single-digit growth range and free cash flow of around $12 billion

Additional information from the company:

• IBM reiterated its intention to acquire HashiCorp for $6.4 billion, which will strengthen its hybrid cloud offerings.
• The company emphasized the strength of its hybrid cloud and artificial intelligence (AI) strategy.
• IBM's WatsonX and generative AI businesses are showing strong growth, with contract value already exceeding $1 billion since WatsonX's launch in mid-2023.

IBM started 2024 with solid financial results, confirming the effectiveness of its strategy, but at the same time, it's not indicating significant growth. The acquisition of HashiCorp is expected to strengthen the company's hybrid cloud offerings, but it could also signal some attempts to stimulate more growth in the future.

IBM shares are down about 6.5% in after-hours trading, erasing all the gains from the Q4 earnings report, similar to Meta.

Source: xStation5