The year is 2024, and the rise of artificial intelligence (AI) continues to reshape industries and economies. IBM, a technology giant, is at the forefront of this transformation and is anticipating strong revenue growth in the coming year.
The company’s optimism comes from the increasing demand for its IT software and consultancy services, with businesses eager to adopt AI. IBM is seizing the opportunity by offering services that assist enterprises in deploying cutting-edge technologies like OpenAI’s viral ChatGPT. In the fourth quarter of the previous year, IBM’s generative AI portfolio, which includes sales from the Watsonx AI platform and consulting contracts, saw a doubling in revenue.
CEO Arvind Krishna remarked on the growth, stating, “Our generative AI book of business has seen impressive traction, with a wide range of offerings gaining popularity. We’ve witnessed strong demand for our software and consulting services, reinforcing our position as a leader in the AI landscape.”
When analyzing their AI-related deals, approximately one-third of the revenue came from software, with the rest stemming from consulting services. IBM secured agreements with several new customers during this period, including Germany’s SAP SE, highlighting their expanding market reach.
Looking ahead to 2024, IBM expects its revenue to grow in line with its mid-single-digit model, roughly around 4 to 6 percent. This forecast exceeds Wall Street expectations, which anticipated growth of around 3 percent, demonstrating IBM’s confidence in the strength of the AI market.
Despite the positive outlook, IBM acknowledges the volatile and uncertain economic environment in which it operates. Other industry players, such as Accenture and Tata Consultancy Services, have faced challenges due to weak discretionary spending by enterprise clients grappling with macroeconomic burdens.
In the fourth quarter of the previous year, IBM reported revenue of $17.38 billion, slightly surpassing estimates of $17.3 billion. The software segment, which is IBM’s largest revenue contributor, generated $7.51 billion in the same period, marking a 3 percent increase from the previous year. The infrastructure segment, housing IBM’s mainframe business, reported revenue of $4.6 billion, outperforming Visible Alpha estimates of $4.29 billion. James Kavanaugh, IBM’s finance chief, attributed the growth in the infrastructure segment to advancements in the mainframe cycle, including embedded AI on chips used in the devices.
However, IBM does face potential hurdles, with exchange rates expected to negatively impact revenue by 100 basis points in 2024. Kavanaugh mentioned that a relatively weaker U.S. dollar benefited revenue in the previous quarter by approximately 80 basis points.
As IBM continues to navigate the evolving landscape of AI and capitalize on emerging opportunities, the company remains confident in its ability to drive growth and deliver value to its customers. With its strategic focus on AI integration and its robust portfolio of software and consulting services, IBM is well-positioned to thrive in the AI revolution.
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