IBM's AI Mainframe Will Boost Revenue This Year

Core Insights - IBM's hardware business, particularly its mainframe systems, remains crucial despite the company generating most of its revenue from software and consulting services [1] - The latest mainframe system, z17, is designed with AI capabilities to enhance performance and meet client demands [3][4] Mainframe System Developments - IBM refreshes its mainframe lineup every two to three years, with the z17 being the latest model featuring the IBM Telum II processor [2][3] - The Telum II processor includes an on-chip AI accelerator capable of processing 450 billion AI inferencing operations daily, with response times around one millisecond [4] AI Integration and Expansion - IBM plans to launch the Spyre Accelerator in Q4 2024, which will enhance the z17's computational power and support generative AI applications [5] - The integration of AI capabilities is expected to drive additional software and consulting sales, with over $5 billion in generative AI-related business already booked [8] Sales Performance and Projections - The z16, IBM's previous mainframe model, experienced a 30% increase in processing power compared to its predecessor, marking the most successful mainframe cycle in the company's history [6] - The z17 is anticipated to significantly boost mainframe revenue in the second half of the year, following a strong performance from the z16, which saw an 88% year-over-year revenue increase in Q3 2022 [7] Revenue Growth Outlook - IBM has guided for revenue growth of over 5% this year, driven by the new mainframe and its AI capabilities, despite potential economic challenges [9] - The z17's focus on AI is expected to maintain IBM's relevance in the market and support another strong mainframe cycle [10]