IBM Q1 Revenue Hits $14.3B, up 0.4% YoY, EPS Beats Estimates
The News: IBM’s Q1 revenue came in at $14.3 billion in the first quarter of 2023 ending March 31, 2023, up by 0.4 percent from $14.2 billion one year ago, as Big Blue reported its latest earnings numbers on April 19. IBM also reported non-GAAP diluted earnings per share (EPS) of $1.36 for Q1, which beat analyst consensus estimates of $1.27 per share from Investing.com. Read the full IBM Q1 2023 earnings Press Release.
IBM Q1 Revenue Hits $14.3B, up 0.4% YoY, EPS Beats Estimates
Analyst Take: IBM’s Q1 2023 earnings delivered a strong overall quarter for IBM as the company continues to see its AI and hybrid cloud strategies playing out well in the market. As expected, IBM is maintaining a solid financial performance against a still-difficult macroeconomic environment around the world, which highlights the company’s resilience due to its broad products, services, and market reach.
Here are IBM’s Q1 2023 earnings by the numbers:
- Q1 2023 revenue of $14.3 billion, up 0.4 percent from $14.2 billion one year ago. The revenue figure just missed analyst estimates of $14.37 billion from Investing.com.
- Q1 2023 non-GAAP net income of $1.2 billion for Q1, down 7.7 percent from $1.3 billion one year ago.
- Q1 2023 non-GAAP diluted EPS of $1.36 per share, down slightly from $1.40 per share one year ago. The latest Q1 share price did beat analyst estimates of $1.27 per share from Investing.com.
Overall, we believe that IBM’s strategies around hybrid cloud and AI are proving to be correct as customers and the market are responding to those messages and continue to invest in and adopt these technologies.
IBM’s Q1 Revenue by Segment
IBM saw growth across most of its business units in Q1 for the fiscal year 2023.
The software unit brought in $5.9 billion in revenue for the quarter, up 2.6 percent from $5.8 billion one year ago. Revenue in the hybrid platform and solutions software division was up two percent, or about five percent in constant currency. The Red Hat division was up eight percent, or about 11 percent in constant currency. The automation division was down one percent, or up two percent in constant currency; and the data and AI division was up one percent, or three percent in constant currency. The security software division was down one percent, or up two percent in constant currency, while the transaction processing software division was up three percent, or up seven percent in constant currency.
The consulting unit brought in revenue of $4.96 billion for Q1, up three percent, or up 8.2 percent in constant currency. The business transformation division was up one percent, or up six percent in constant currency, while the technology consulting division was down one percent, or up four percent in constant currency. The application operations software unit was up by seven percent, or about 13 percent in constant currency.
IBM’s infrastructure unit brought in revenue of $3.1 billion, down 3.7 percent from $3.2 billion one year ago. Hybrid infrastructure was up one percent from a year ago, or about four percent in constant currency, while IBM zSystems mainframe sales were up seven percent, or about 11 percent in constant currency. Distributed infrastructure was down three percent, or flat in constant currency, while infrastructure support was down nine percent, or down four percent in constant currency.
IBM’s finance unit brought in $196 million in revenue in Q1, up 27.3 percent from $154 million one year ago, or up 31 percent in constant currency.
IBM’s Q1 Revenue Announcement Provides Full-Year 2023 Expectations
IBM shared some revenue guidance for the full year of fiscal 2023 including expected constant currency revenue growth of three to five percent. The company said it also expects about $10.5 billion in free cash flow for the full fiscal year, which is up more than $1 billion YoY from FY2022.
IBM Overview for 2023
Yes, IBM missed slightly on analyst expectations for its Q1 revenue, but viewed overall this was a good quarter for this confident and steady technology leader, with slightly increased total revenue, healthy EPS growth, and a positive outlook for the future.
Led by IBM chairman and chief executive officer Arvind Krishna and his talented executive team, we observe that IBM remains nimble and clearly laser focused on the growth markets of AI and hybrid cloud to help its customers meet and exceed their business technology goals around the world.
One area where IBM was particularly impressive in Q1 was in its Red Hat OpenShift Growth, which is now above 40 percent, with $1 billion in annual recurring revenue. Those are some very impressive numbers and there’s no reason to think that this growth cannot continue.
Also ripe for growth at IBM are the company’s IT security portfolio and expertise as cybersecurity demand increases along with the company’s growing and impressive AI and automation portfolios.
These are all areas where we see IBM making a bigger impact in the marketplace to continue to serve customers and attract prospects, and raise its earnings and performance in the quarters ahead.
Certainly, IBM continues, like its competitors, to battle a host of macroeconomic challenges that are playing out around the world, but the company has so far come out strong despite those challenges.
As we have said before, IBM remains headed in the right direction and we expect Big Blue to navigate today’s business conditions with smart strategies and skilled leadership. IBM remains a tech leader to watch in 2023.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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