IBM shares jump on strong sales prospects and AI bookings

On By Littum

(Bloomberg) shares in International Business Machines Corp. increased after the company projected strong revenue growth in the new financial year and a leap in AI-related bookings.

Most read from Bloomberg

For the financial year ending in December 2025, Big Blue said it expects $ 13.5 billion in free cash flow. That’s over the $ 12.9 billion expected of Wall Street. Revenue will expand at least 5% in constant currency, although the current exchange rates would dampen this extension by two percentage points, the company said on Wednesday in a statement.

Bookings for AI Consulting and Software have exceeded $ 5 billion since mid-2023, Armonk said, New York-based company said. It’s up from the $ 3 billion IBM that was revealed during its last quarterly revenue report in July. About 80% of the bookings come from the consultancy with the rest from software.

IBM has worked to transform from a conventional computer company into a focused on high growth software and services. It has used acquisitions to expand the company’s products, including a proposed acquisition of Hashicorp Inc., which was announced in April and the purchase of Apptio for $ 4.6 billion in 2023.

“Three years ago we made a vision for a faster growing, more-profitable IBM. I am proud of the work that the IBM team has done to fulfill or exceed our obligations, ”CEO Arvind Krishna said in the statement.

Shares rose as much as 12% to $ 255.50 after markets opened in New York on Thursday.

Total sales rose 1% to $ 17.6 billion in the period ending December 31. Analysts estimated an average of $ 17.5 billion, according to Bloomberg-compiled data. The company’s software unit was its largest and fastest growing and expanded 10% to $ 7.92 billion in the quarter.

Software expansion was powered by 16% growth in Red Hat, a company IBM acquired in 2019. Adjusted profit was $ 3.92 per year. Share in the quarter in front of the average estimate of $ 3.74.

Sales in IBM’s consulting unit fell in a fourth quarter in a row to $ 5.18 billion. Customers continue to redirect funds from traditional consulting projects to AI-focused, CFO Jim Kavanaugh said in an interview.

The Trump administration has said it will reduce spending across the government, which has investors over the potential influence of tech companies. Kavanaugh said that 3% to 4% of IBM’s revenue is linked to the federal government, and tech initiatives that can be taken by the new administration are a “significant option.”