IBM achieves significant growth through its AIM Strategic Initiatives.

IBM released its quarterly results, which showed $15.8 billion in revenue and $2.8 billion of operating pre-tax income. The company's operating margin was 14.1 percent.

IBM has deployed AI across clients' business tools for managing hybrid cloud environments and across its platform and products.  

IBM is prioritizing its open-source granite models, which have 3 billion to 34 billion parameters and are trained in 116 programming languages.

To date, the company has generated over $2 billion in revenue from generative AI. The company’s new offerings in GenAI Watsonx, AI middleware, Watsonx Assistants, IBM Concert, and others contributed about $0.5 billion to the AI book of business from its inception.

In M&A, the company successfully acquired StreamSets and webMethods from Software AG and anticipates closing the HashiCorp acquisition by the end of the year.

Segment results

Software: The software segment experienced an 8.4 percent growth in constant currency, and revenue was $6.7 billion. For the software segment,80% of revenue is recurring. The hybrid platform and solutions’(Red Hat, Automation, Data & AI and  Security) Annual Recurring Revenue (ARR) now stands at $14.1 billion, a 9% increase from the previous year. Red Hat bookings increased by 20% this quarter, while OpenShift annual bookings rose by over 40% annually. Transaction processing saw 13% revenue growth.

Consulting: Consulting revenues were $5.2 billion, a 1.8 percent increase in constant currency. This growth was driven by strong demand for large finance and supply chain transformation projects, cloud modernization, and application development. However, the company's performance in smaller projects was impacted by limited discretionary spending. About three-quarters of GenAI revenue comes from consulting assignments. Revenue from application operations declined, mainly due to a decrease in on-premises custom application management, although this was partially offset by growth in cloud-based application management services.

Infrastructure: Infrastructure revenues were $3.6 billion, up 2.7 percent at constant currency. The company capitalizes on the solid and broad-based demand for hardware platforms, especially IBM Z. 

Observations

·        The company is seeing increased contributions to consulting revenue from GenAI related projects.

·        Enterprises are focusing on reprioritizing spending on consulting engagements and trying to align their IT budgets to new technologies.

·        The company is seeing an uptake in AI-based products, which it sees as making a decent contribution to revenue.  

IBM  AIM Strategy:

·        Acquire & Optimize: Continue building capabilities around the hybrid cloud. The company is acquiring companies in this space and infusing AI into its hybrid cloud products.

·        Innovate & build: The company continues developing innovative products and capabilities in the GenAI space. It has launched AI assistants and open-sourced LLM and is bringing AI to Red Hat’s OpenShift AI.

·        Modernize: IBM is adding capabilities and new products to its transaction procession segment, which helped the company achieve solid growth in the last quarter.