IBM’s recent earnings report showed a positive trend in the first quarter of 2024. The company beat the Zacks Consensus Estimate in terms of net income, but fell short on the bottom line, despite strong demand for AI and hybrid cloud solutions. IBM reported a GAAP net income of $1.69 per share, up from $1.02 per share in the prior-year quarter.
Total quarterly revenue increased to $14,462 million due to strong demand for hybrid cloud and artificial intelligence solutions. Gross profit improved to $7,742 million, with gross margins of 53.5%. However, total expenses also increased, driven by higher interest expenses and research and development costs.
In terms of segmental performance, IBM saw growth in its software and consultant segments, driven by demand for hybrid platforms and solutions, Red Hat, automation, data, and artificial intelligence. The company’s infrastructure segment saw revenue decrease slightly, but this was partially offset by higher demand for hybrid and distributed infrastructure.
IBM generated $4,168 million in cash from operations during the first quarter, with free cash flow reaching $1.91 billion. The company also reiterated its expectations for revenue growth in the mid-single digits in constant currency for the full year 2024, with free cash flow expected to be around $12 billion.
Despite these positive results, estimates have been trending downward for IBM over the past month. The company currently has a Zacks Rank of #3 (Hold). Investors have seen a downward trend in estimate revisions, with the consensus estimate changing by -5.19%.
Overall, IBM has a VGM Score of C, with a good Growth Score but lagging on momentum and value scores. Analysts expect the stock to deliver in-line performance in the coming months.
In conclusion, while IBM showed strong performance in its first quarter of 2024, there are concerns about the downward trend in estimates and the stock’s overall performance. Investors will be closely watching for any developments leading up to the company’s next earnings release.
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