IBM’s quarterly revenue fell for a fourth consecutive quarter, driving its shares down even though it is anticipating growth this year as sales recover from the coronavirus pandemic.
IBM reported Thursday that revenue declined 6% to $20.37 billion, the sharpest dip in five years. Sales fell across all five of IBM’s business segments, with cloud and cognitive software, which includes recent acquisition Red Hat, dropping 5% to $6.84 billion.
Analysts had expected total revenue of $20.67 billion. The company has now revenue fall in all but four of the past 34 quarters.
CFO James Kavanaugh told Reuters an accelerated move to cloud by businesses, a sales rebound in the global business services unit, and a weaker dollar make IBM confident of returning to growth in 2021.
“The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021,” CEO Arvind Krishna said in a news release.
But in trading Friday, IBM’s shares tumbled 9.7% to $118.91, following a 6.8% drop in the after-hours session Thursday.
As The Wall Street Journal reports, the IT pioneer “has struggled to revamp its business in the age of the cloud and has reported mostly revenue declines in the past decade.” To turn things around, Krishna is focusing on revenue growth and investing in artificial intelligence and the hybrid-cloud.
IBM also plans to spin off its $19 billion managed-infrastructure business by the end of 2021.
In the fourth quarter, revenue from cloud computing rose 10% to a record $7.5 billion. But Kavanaugh told analysts that overall sales were hit by the pandemic-fueled “shift in clients’ buying behaviors and priorities. Given the level of macroeconomic uncertainty, more clients tended to move toward shorter duration engagements impacting our software revenue.”
On an adjusted basis, profit from continuing operations was $2.07 a share, beating analysts’ estimates of $1.81 a share.
Bernstein Research analyst Toni Sacconaghi wrote ahead of the fourth-quarter report that he considered IBM’s projections for mid-single-digit revenue growth in 2022 to be “unrealistic.”