IBM Sees Boost in Software and AI Demand While Consulting Declines
- tech360.tv
- Jul 25, 2024
- 2 min read
IBM beats analysts' revenue expectations and raises software growth forecast. Software revenue up by 7% in the quarter. AI Book of Business reaches US$2 billion, with US$1 billion added in Q2.
The tech giant has concentrated on expanding its Watson platform, enabling users to implement chatbots and improve AI code. Additionally, IBM has made its Granite range of AI models open-source to promote wider adoption of its AI services.
Following the positive results, IBM's shares surged by approximately 3% in after-hours trading, building on a year-to-date increase of around 12% driven by the uptrend in AI-related companies' stocks.
Software revenue saw a notable 7% rise to US$6.74 billion in the quarter. IBM now anticipates this segment to grow by a high-single-digit percentage in 2024, up from its previous forecast of slightly above the upper end of mid-single digit percentage growth.
The company's AI Book of Business, a metric encompassing bookings and actual sales across various products, expanded to US$2 billion, with approximately US$1 billion added in the second quarter alone.
Tejas Dessai, a research analyst at Global X, remarked, "The commercialisation of Generative AI is accelerating, positioning diversified enterprise technology companies like IBM to capitalise on the growing demand for AI integration."
Conversely, IBM revised its consulting revenue expectations downwards, now projecting growth in low-single-digit percentages compared to the earlier forecast of 6%-8%.
Consulting revenue dipped by about 1% to US$5.18 billion in the second quarter as clients scaled back discretionary spending and short-term consulting projects amidst prolonged high interest rates and inflationary pressures.
James Kavanaugh, IBM's Chief Financial Officer, highlighted, "You're seeing an overall very dynamic macroeconomic environment, and underneath that, clients are choosing technology for competitive advantage. They are spending on GenAI. But they are making trade-off decisions and spending reprioritisations, and you see that play out within consulting."
Companies are prioritising investments in longer-term consulting projects centred on their AI operations, the revenue from which is yet to be fully reflected in IBM's financial reports.
IBM reported revenue of US$15.77 billion, surpassing analysts' average estimate of US$15.62 billion. The second-quarter adjusted profit of US$2.43 per share outperformed estimates of US$2.20, supported by strong sales in the high-margin software sector.
IBM beats analysts' revenue expectations and raises software growth forecast.
Software revenue up by 7% in the quarter.
AI Book of Business reaches US$2 billion, with US$1 billion added in Q2.
Source: REUTERS
