Despite a challenging environment, tech giant International Business Machines (NYSE:IBM) delivered better-than-anticipated third-quarter results, driven by strength in its software and hybrid cloud solutions. Revenue grew 6.5% to $14.11 billion, surpassing analysts’ expectations of $13.52 billion.
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Also, adjusted EPS declined 1.6% year-over-year to $1.81 but topped the Street’s consensus estimate of $1.79.
IBM stock was up 2.9% in Wednesday’s extended trading session. Shares have declined 8.2% year-to-date, faring better than the broader market.
Revenue from IBM’s Software, Consulting, and Infrastructure segments increased 7.5%, 5.4%, and 14.8% in the third quarter, while the Financing segment revenue declined 5.7%. Overall, currency headwinds were a drag on the quarter’s revenue. As per the company, currency translation hit the Q3 top-line by nearly $1.1 billion.
The company now expects its full-year constant currency revenue growth to be above its mid-single digit model, compared to its previous outlook expected to be “at the high end of its mid-single digit model.” It continues to project a full-year free cash flow of about $10 billion.
During the Q3 conference call, IBM indicated that the business environment in the U.S. and Asia was very robust but cautioned about the demand in Europe due to the impact of the energy crisis and inflation.
IBM has been transforming its business by focusing on hybrid cloud and artificial intelligence (AI) and exiting non-core businesses. In the last 12 months, the company’s hybrid cloud revenue increased by 15% to $22.2 billion.
Earlier this month, IBM announced its plan to invest $20 billion across the Hudson Valley region over the next 10 years to capture prospects in semiconductors, computers, hybrid cloud, AI, and quantum computers.
What is the Target Price for IBM Stock?
Wall Street is cautiously optimistic about IBM stock with a Moderate Buy consensus rating based on four Buys, two Holds, and one Sell. The average IBM stock price target of $139.14 implies 13.6% upside potential.
