IBM reveals Q3 2023 earnings: Software and consulting sectors shine

In its latest financial disclosure, IBM (NYSE: IBM) unveiled its third-quarter earnings for 2023 with the technology giant reporting a revenue of $14.8 billion, marking a 4.6% increase, with a 3.5% increment at constant currency. The software sector experienced an 8% rise in revenue, while consulting revenue shot up by 6%. Notably, infrastructure revenue declined by 2%.

From a profitability perspective, IBM observed an increase in both its Gross Profit Margin and Pre-Tax Income Margin. James Kavanaugh, IBM’s senior VP and CFO, remarked, “Our continued focus on the fundamentals of our business is driving solid revenue growth, profit margin expansion, and strong cash generation.”

CEO Arvind Krishna emphasized, “Technology remains a critical source of competitive differentiation and progress for organizations around the world.” IBM’s watsonx AI and hybrid cloud solutions are receiving heightened adoption, bolstering growth in the software and consulting domains. “This is helping drive solid growth in our software and consulting businesses,” Krishna added.

Segment Performance Breakdown

Delving into segment results:

• Software: Generated revenues of $6.3 billion, with Hybrid Platform & Solutions, Red Hat, Automation, and Data & AI showing growth, albeit a slight decline in Security.
• Consulting: Achieved revenues of $5.0 billion, with gains in Business Transformation and Application Operations segments.
• Infrastructure: Reported revenues of $3.3 billion with a minor decline, yet IBM zSystems stood out with a 9% growth.
• Financing: Secured revenues of $0.2 billion, noting an uptick of 6.9%.

Cash Flow and Financial Stance

For Q3, IBM generated net cash from operating activities totaling $3.1 billion. The firm distributed $1.5 billion in dividends to its shareholders during this period. Furthermore, for the first nine months of 2023, IBM produced a net cash from operating activities amounting to $9.5 billion. Concluding the quarter, IBM boasted a cache of $11.0 billion in cash and marketable securities.

Full-Year 2023 Projections

IBM remains optimistic about its financial journey in 2023. The company anticipates a constant currency revenue growth ranging from three to five percent. Additionally, they foresee a free cash flow of approximately $10.5 billion, marking a year-to-year surge of over $1 billion.