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Innovation

IBM beats Q4 estimates, reports $6.2B in hybrid cloud revenue

In its first financial report since spinning off its managed services business Kyndryl, IBM delivered results that were better than expected.
Written by Stephanie Condon, Senior Writer

Shares of IBM were up in after-hours trading on Monday, after the company reported better-than-expected results in its fourth quarter. In its first financial report since spinning off its managed services business Kyndryl, IBM highlighted the double-digit revenue gains of its hybrid cloud business. 

Non-GAAP earnings per share came to $3.35 on revenue of $16.7 billion, up 6.5%. 

Analysts were expecting earnings of $3.14 per share on revenue of $15.98 billion. 

Hybrid cloud revenue in Q4 totaled $6.2 billion, up 16%. Full-year hybrid cloud revenue was $20.2 billion, up 20%.

"We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," CEO Arvind Krishna said in a statement. "Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single-digit revenue growth and strong free cash flow in 2022."

While IBM shed its managed services business in 2021, it also made a number of investments to strengthen its focus on AI and hybrid cloud. 

"In 2021, we continued to invest for the future by increasing R&D spending, expanding our ecosystem, and acquiring 15 companies to strengthen our hybrid cloud and AI capabilities," IBM SVP and CFO James Kavanaugh said in a statement.

IBM changed its reporting segments in Q4, breaking down results for Software (which includes Hybrid Platform & Solutions and Transaction Processing), Consulting (Business Transformation, Technology Consulting, and Application Operations), Infrastructure (Hybrid Infrastructure, Infrastructure Support), and Financing (client and commercial financing).

Software in Q4 brought in $7.3 billion in revenue, up 8.2%, up 10.1% at constant currency (including about 5 points from incremental external sales to Kyndryl). Within Software, Hybrid Platform & Solutions was up 7%. That includes Red Hat(up 19%), Automation (up 13%), Data & AI (up 1%) and Security (down 2%). 

Also, within Software, Transaction Processing was up 11%. Software segment hybrid cloud revenue was up 22%.

IBM's Consulting business in Q4 brought in revenues of $4.7 billion, up 13.1%. Within that category, Business Transformation was up 18%. Technology Consulting was up 14%. Application Operations was up 6%. Consulting segment hybrid cloud revenue was up 31%.

Infrastructure revenue in Q4 totaled $4.4 billion, down 0.2%, up 1.7% at constant currency (including about 5 points from incremental external sales to Kyndryl). Hybrid Infrastructure was flat within the category -- IBM Z sales were down 65, and Distributed Infrastructure was up 5%.

Additionally, Infrastructure Support was down 1%. Infrastructure segment hybrid cloud revenue was down 12%.

The Financing segment in Q4 brought in revenue of $0.2 billion, down 29.4%.

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