IBM posted a second straight decline in quarterly revenue but still beat analysts’ estimates, led by its global business services unit.
For the fourth quarter, the company’s revenue fell 3% to $21.76 billion, ahead of estimates of $21.71 billion. It made a net profit of $4.4 billion, or $4.87 per share, beating expectations of $4.72 per share.
Full-year revenue increased 1% to $79.86 billion — IBM’s first gain in annual revenue since 2011.
“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics, and security,” CEO Ginni Rometty said in a news release.
Global business services, which includes IBM’s consulting, application management, and global process services businesses, powered the fourth quarter, generating 4% revenue growth, to $4.3 billion.
Of IBM’s other business segments, revenue from technology services and cloud platforms, systems, and global financing was down, while cognitive solutions was flat at $5.5 billion but beat the consensus estimate of $5.27 billion.
In 2018, Strategic Imperatives — the social, mobile, analytics, and cloud business on which Rometty has pinned her hopes for a turnaround at IBM — accounted for $39.8 billion in revenue, up 9%. Cloud revenue rose 12% to $19.2 billion, with $11.3 billion delivered as a service and $7.8 billion for cloud-related hardware, software, and services.
The company generated full-year free cash flow of $11.9 billion, excluding global financing receivables, and ended the fourth quarter with $12.2 billion of cash on hand.
“In 2018 we repositioned our business model and delivered revenue, operating profit, and EPS growth along with strong free cash flow realization,” CFO James Kavanaugh said.
For this year, IBM is now expecting earnings, excluding certain items, of at least $13.90, versus analysts’ estimates of $13.79.
“The company is betting that its forthcoming acquisition of [cloud software provider] Red Hat for $34 billion in the second half of 2019 will put it in a better position for turning things around,” Business Insider said.
Kavanaugh told analysts in an earnings call that the client response to the Red Hat deal “has been overwhelmingly positive.”