- IBM predicts annual revenue growth exceeding market expectations, driven by increased adoption of artificial intelligence (AI) by businesses and their demand for IBM’s software and consulting services.
- Through its repositioning strategy, IBM has focused on AI consulting and software solutions, achieving success and maintaining a strong position in the competitive landscape.
IBM, the technology giant based in New York, has announced that it expects annual revenue growth to surpass market expectations. This forecast comes as businesses rush to adopt artificial intelligence (AI), increasing their demand for IBM’s IT software and consulting services.
AI adoption driving IBM’s growth
IBM’s annual revenue growth is expected to exceed market expectations, thanks to the growing demand for AI adoption among businesses. As companies continue to implement AI technologies, the need for IBM’s IT software and consulting services has become more prevalent. This trend is driving IBM’s growth and has led to an increase in its stock price by over 8% during after-hours trading.
Repositioning for success
Under the leadership of CEO Arvind Krishna, IBM, with a history of over 111 years, has been undergoing a repositioning strategy. The company is now focusing on software and consulting, with a renewed emphasis on AI and leveraging broader industry integration. In line with this strategy, IBM plans to lay off some employees in 2024 while hiring more positions centered around AI. The overall employee count is expected to remain relatively stable by the end of the year.
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AI Consulting as a key advantage
IBM’s significant advantage in the field of AI consulting, coupled with its increasingly relevant AI software solutions, positions the company favorably in the competition. James Kavanaugh, Chief Financial Officer, informed Reuters that about one-third of the growth came from software, with the rest attributed to consulting. He also added that IBM signed AI-related agreements with new clients, including Germany’s SAP SE.
Revenue growth expectations
Based on data from LSEG (London Stock Exchange Group), IBM anticipates mid-single-digit revenue growth of around 4% to 6% in 2024, while Wall Street’s expectation is approximately 3%. CEO Krishna remarked during a post-earnings conference call, “As we move into the 24th century, technology budgets should remain consistent with 2023.”
Operating in an uncertain economic environment
Kavanaugh added that IBM continues to operate in an “extremely unstable and uncertain” economic environment. Nevertheless, the company’s reported fourth-quarter revenue and adjusted profit exceeded expectations, with its largest business segment, software, growing by approximately 3%. The infrastructure division, which encompasses the mainframe business, recorded $4.6 billion in revenue for the fourth quarter, surpassing Visible Alpha’s projected revenue of $4.29 billion. This was primarily driven by enhancements such as embedded AI functionalities on chips.
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Currency exchange rates as a challenge
Kavanaugh further mentioned that currency exchange rates are expected to cause a 100 basis points decrease in revenue for 2024. Despite this challenge, IBM’s focus on AI technologies and consulting services puts the company in a strong position for growth in the coming years.
In conclusion, IBM’s forecasted revenue growth demonstrates the increasing demand for AI technologies among businesses. With its repositioning strategy and focus on AI consulting and software solutions, IBM is poised for continued success in the competitive tech industry.
