IBM Q1 earnings: software revenue up as AI fruits begin to materialize

Core Insights - IBM reported Q1 financial results with revenue of $14.46 billion, slightly below the expected $14.54 billion, while operating earnings per share were $1.68, exceeding the forecast of $1.59 [1][5] - The company's software revenue increased by 5% to $5.90 billion, driven by strong demand for AI solutions [1][5] - CEO Arvind Krishna highlighted the growth in free cash flow and the success of the watsonx platform, which has surpassed $1 billion in revenue since its launch [1][3] Financial Performance - Net income rose year-over-year to $1.6 billion [5] - Infrastructure revenue exceeded expectations at $3.08 billion, compared to the estimated $2.94 billion [5] - Consulting revenue was reported at $5.19 billion, slightly lower than the expected $5.10 billion [5] Strategic Developments - IBM is expanding its AI offerings with the introduction of Meta Llama 3 to the watsonx platform [4] - The company plans to acquire HashiCorp for $6.4 billion to strengthen its position in hybrid cloud and AI [4] - The growth in IBM's generative AI segment is expected to significantly increase earnings in the coming quarters [3] Market Reaction - Following the earnings report, IBM's stock fell over 7% in after-hours trading to $171.85, despite a year-to-date increase of 12.4% and a 35% rise over the last six months [6] - The CEO remains optimistic about 2024, projecting $12 billion in free cash flow and revenue growth in line with mid-single digit expectations [6]