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IBM forecasts upbeat 2022 revenue on cloud strength

Cloud revenue jumped 14 percent to US$5 billion during the reported quarter. Beating estimates of $13.85 billion according to Refinitiv data

IBM expects to hit the top end of its revenue growth forecast for 2022, the company said on Tuesday, even as it flagged a US$300 million (A$507 million) knock to revenue from the suspension of its business in Russia.

The big tech company expects the impact from Russia to be less than “half a percent” of total revenue last year, or a little over $200 million, Chief Financial Officer James Kavanaugh told Reuters.

Servers from IBM, Dell Technologies Inc DELL.N and Hewlett Packard Enterprise Co HPE.N top the market in Russia. IBM had generated “a couple hundred million dollars” in profit from the region last year, Kavanaugh said.

Total revenue rose 8 percent to US$14.2 billion in the first quarter, beating estimates of US$13.9 billion according to Refinitiv data. 

Revenue from software and consulting segments, which make up over 70% of IBM’s business, rose 12% and 13%, respectively.

IBM said it expects to hit the higher end of its mid-single-digit revenue growth forecast for this year, after it trounced first-quarter estimates for revenue, energized by its focus on cloud services amid higher global spending on technology.

IBM’s revenue grew 3.9% in 2021. Analysts on average expect annual revenue of $60.69 billion, which implies a 5.8% rise from last year, according to IBES data from Refinitiv.

Having shed its large and laggard IT managed infrastructure business last year, IBM has placed its bets on high-growth software and consulting businesses with a focus on the so-called “hybrid cloud” to put an end to its years of stagnating revenue growth.

Hybrid cloud, where companies use a combination of their data centres and rented compute resources to store and process data, allows IBM to take a plunge into the lucrative enterprise cloud market without having to compete directly with large vendors such as AMZN by Amazon.com. Or AWS and MSFT.O from Microsoft Azure.

“The fact that IT giant IBM came in with good numbers despite the Ukraine crisis and Netflix’s negative results sets an encouraging tone for enterprise software and tech companies reporting next week,” said Dan Morgan, senior portfolio manager at Synovus Trust.

After abandoning its large and delayed IT-managed infrastructure business last year, IBM has bet on fast-growing software and consulting firms with a focus on the so-called “hybrid cloud”

The company expects to hit the high end of its revenue growth guidance for this year in the mid-single digits, with growth expected to come from the consulting business.

Analysts on average expect annual revenue of US$60.7 billion, implying a year-on-year rise of 5.8 percent.

Kavanaugh told Reuters that clients pushing to digitize operations is fueling strong demand for the consulting business, including in Europe despite the Ukraine crisis.

Total revenue rose 8% to $14.20 billion during the quarter, beating estimates of $13.85 billion.

The TBN team is a well establish group of technology industry professionals with backgrounds in IT Systems, Business Communications and Journalism.

Editorial Team
Editorial Team
The TBN team is a well establish group of technology industry professionals with backgrounds in IT Systems, Business Communications and Journalism.

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