https://www.wsj.com/business/earnings/ibm-set-to-benefit-from-focus-on-ai-automation-as-clients-seek-efficiency-in-uncertain-economy-cfo-says-a373c8a7
Adjusted per-share earnings of $1.60 came in above the $1.42 analysts expected
By: Connor Hart
April 23, 2025 4:35 pm ET
The uncertain macroeconomic backdrop is prompting businesses to rethink their spending in an attempt to get the best possible returns on their investments, International Business Machines CFO James Kavanaugh said Wednesday.
The shift could pose a benefit to the tech company. “When you think about a very dynamic and uncertain environment, clients are focused on cost efficiency, cash preservation and liquidity,” Kavanaugh said. “Our automation portfolio plays extremely well to that.”
Sales across IBM’s automation portfolio rose 14% in the first quarter, helping buoy the company’s software segment 7% higher, to $6.34 billion.
This increase more than offset IBM’s consulting and infrastructure segments, which saw sales fall 2% and 6%, respectively.
Consulting, which logged sales of $5.07 billion, has largely stabilized, Kavanaugh said. The unit has notched falling sales as companies have reprioritized away from discretionary-based projects. Still, Kavanaugh believes the company’s early adoption of AI will help it in the long term.
“The key for us is going to be continuing to win where we have an early leadership position in generative AI,” he said. “We’re on the front-end of that curve.”
Infrastructure sales fell 6%, to $2.89 billion. IBM is at the tail-end of a three-year product cycle, though it has plans to launch in June its next-generation z17 mainframe, a device designed to allow companies to run multiple operations simultaneously and support big datasets, artificial intelligence and large-language models.
“The value proposition is extremely strong,” Kavanaugh said, noting the new device is expected to contribute about one point of growth to the company’s topline in 2025.
For the year, IBM backed its outlook for constant currency revenue growth of at least 5%. It noted that current foreign exchange rates would result in an up to 1.5% tailwind to growth.
The company continues to expect about $13.5 billion in free cash flow for the full year, compared with analyst views for $13.6 billion.
For the second-quarter, IBM guided for sales between $16.4 billion and $16.75 billion, ahead of the $16.31 billion expected by analysts.
The outlooks came as the company reported higher-than-expected profit and revenue in the first quarter.
For its three months ended March 31, IBM posted a profit from continuing operations of $1.05 billion, or $1.12 a share, compared with $1.58 billion, or $1.69 a share, in the same period a year earlier.
Adjusted per-share earnings of $1.60 came in above the $1.42 that analysts surveyed by FactSet expected.
Total revenue edged 0.5% higher to $14.54 billion, topping the $14.39 billion that analysts modeled.