IBM Beats Q4 Earnings Estimates on Solid Cloud & AI Traction

International Business Machines Corporation IBM reported strong fourth-quarter 2024 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The company witnessed healthy demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. IBM exceeded the target metrics related to revenue, profitability and cash flow growth that it laid out for the three-year mid-term model at the end of 2021. Despite economic uncertainty due to geopolitical issues, supply chain vulnerabilities, incessant cyber threats and the evolving landscape of interest rates and inflation levels, the company expects to deliver sustainable growth with advanced technology and deep consulting expertise.Net IncomeOn a GAAP basis, net income for the reported quarter was $2.91 billion or $3.09 per share compared with $3.29 billion or $3.55 per share in the year-ago quarter. The significant decline in GAAP earnings was due to high operating expenses.Excluding non-recurring items, non-GAAP net income from continuing operations was $3.92 per share compared with $3.87 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 19 cents.For 2024, IBM reported net income of $6.02 billion or $6.43 per share compared with $7.5 billion or $8.14 per share in 2023. Non-GAAP net income from continuing operations was $10.33 per share compared with $9.62 in 2023.International Business Machines Corporation Price, Consensus and EPS Surprise International Business Machines Corporation price-consensus-eps-surprise-chart | International Business Machines Corporation QuoteQuarter DetailsQuarterly total revenues increased to $17.55 billion from $17.38 billion on strong demand for hybrid cloud and AI, driving growth in the Software segment. On a constant currency basis, revenues were up 2% year over year. The top line exceeded the consensus estimate of $17.51 billion. Gross profit improved to $10.44 billion from $10.23 billion in the prior-year quarter, resulting in respective gross margins of 59.5% and 59.1% owing to a strong portfolio mix. Total expenses increased to $7.13 billion from $6.51 billion due to higher selling, general and administrative expenses and research and development costs.Segmental PerformanceSoftware: Revenues improved to $7.92 billion from $7.18 billion, driven by growth in Red Hat (up 17%), Automation (16%), Data & AI (5%), Security (5%) and Transaction Processing (11%). The segment’s revenues beat our estimate of $7.43 billion on solid hybrid cloud traction. Segment profit was $3.1 billion compared with $2.6 billion in the year-ago quarter for margins of 39.2% and 36.9%, respectively. The company is witnessing healthy hybrid cloud adoption by clients and solid demand trends across RedHat, automation and generative AI offerings like watsonx.Consulting: Revenues were $5.17 billion compared with $5.28 billion a year ago as clients prioritized spending and pulled back on discretionary projects. The segment’s revenues missed our estimate of $5.39 billion. Segment profit declined to $606 million from $654 million for margins of 11.7% and 12.4%, respectively.Infrastructure: Revenues were $4.26 billion compared with $4.6 billion on lower demand for hybrid and distributed infrastructure, reflecting product cycle dynamics. Segment profit was $1.06 billion compared with $1.3 billion in the year-ago quarter, owing to higher investments in the business across areas like AI, hybrid cloud and quantum, for respective margins of 25% and 28.2%.Financing: Revenues declined to $170 million from $175 million a year ago. Segment profit was down to $94 million from $117 million in the year-ago quarter for respective margins of 55% and 67%.Cash Flow & LiquidityDuring the quarter, IBM generated $4.33 billion in cash from operations compared with $4.46 billion in the year-ago quarter, bringing the respective tallies for 2024 and 2023 to $13.44 billion and $13.93 billion. Free cash flow was $6.16 billion in the quarter, up from $6.09 billion in the prior-year period, driven by higher profit and working capital efficiencies. As of Dec. 31, 2024, the company had $13.95 billion in cash and cash equivalents with $49.88 billion of long-term debt compared with respective tallies of $13.07 billion and $50.12 billion a year ago.OutlookFor 2025, the company expects revenues to grow at least 5% on a constant currency basis driven by a strong portfolio mix, operating leverage and yield from productivity initiatives. Free cash flow is expected to be in the vicinity of $13.5 billion.Zacks RankIBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Upcoming ReleasesArista Networks Inc. ANET is scheduled to release fourth-quarter 2024 earnings on Feb. 18. The Zacks Consensus Estimate for earnings is pegged at 57 cents per share, suggesting a growth of 9.6% from the year-ago reported figure.Arista has a long-term earnings growth expectation of 17.1%. ANET delivered an average earnings surprise of 14.8% in the last four reported quarters.Akamai Technologies, Inc. AKAM is slated to release fourth-quarter 2024 earnings on Feb. 20. The Zacks Consensus Estimate for earnings is pegged at $1.52 per share, indicating a decline of 10.1% from the year-ago reported figure.Akamai has a long-term earnings growth expectation of 6.1%. AKAM delivered an average earnings surprise of 2.7% in the last four reported quarters.Pinterest, Inc. PINS is set to release fourth-quarter 2024 earnings on Feb. 6. The Zacks Consensus Estimate for earnings is pegged at 63 cents per share, implying a growth of 18.9% from the year-ago reported figure.Pinterest has a long-term earnings growth expectation of 33%. PINS delivered an average earnings surprise of 17% in the last four reported quarters.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report International Business Machines Corporation (IBM): Free Stock Analysis Report Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report Arista Networks, Inc. (ANET): Free Stock Analysis Report Pinterest, Inc. 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