By Chavi Mehta
(Reuters) – IT software and consultancy services provider IBM reported third-quarter revenue slightly above Wall Street targets on Wednesday, buoyed by stable demand for its software solutions and a stronger-than-expected mainframe business.
Shares of the Armonk, New York-based company rose 2% in trading after the bell.
IBM, like its peers in the IT services industry, is operating in a tough macroeconomic environment that has triggered a further tightening of client budgets, with consulting being the most impacted.
While the company has seen a slowdown in the growth of its overall business compared to last year, it reiterated its annual target for revenue growth and free-cash-flow generation.
IBM’s generative artificial intelligence (AI) book of business, which could refer to a combination of actual sales as well as bookings, was in the “low hundreds of millions of dollars” during the third quarter, with customers including accounting firm Ernst & Young, IBM Chief Financial Officer James Kavanaugh told Reuters.
Big Blue, which started providing AI applications to enterprises many years before the generative AI hype took over, said it was seeing high interest for its software and consulting services from clients who want to infuse the technology into their operations.
Revenue at its software segment, which now includes newly acquired IT budgeting software maker Apptio, rose nearly 8%, excluding the impact from a strong dollar.
At its infrastructure business, which houses its mainframe computers, revenue was down 3.2% to $3.3 billion at constant currency, compared to analysts’ estimate of $3.13 billion, according to Visible Alpha.
The 111-year-old company, which makes more than half of its revenue outside the United States, said a strong dollar during the three months ended Sept. 30 hurt its quarterly revenue by about $250 million more than expected earlier, and it now expects a hit of between $550 million and $600 million to its overall fiscal 2023 revenue.
IBM’s revenue in the third quarter rose about 5% to $14.8 billion, compared to an estimate of $14.73 billion, according to LSEG data.
(Reporting by Chavi Mehta in Bengaluru; Editing by Pooja Desai)
