# IBM beats first-quarter profit estimates, signals demand holding up
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-20
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: IBM Exceeds Q1 Profit Expectations, Shows Strong Demand
Meta Description: IBM surpasses Q1 profit expectations, indicating robust demand for IT services. Shares rise 3.5% after hours. CEO Krishna focuses on digital transformation
URL: https://financedigest.com/ibm-beats-first-quarter-profit-estimates-signals-demand-holding-uphtml

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By Chavi Mehta

(Reuters) -IBM Corp beat Wall Street expectations for first-quarter profit on Wednesday and signaled demand for IT services was better than feared, sending shares up 3.5% after the bell.

The company’s software and consulting businesses rose 6% and 8.2%, respectively, at constant currency in the first quarter, in line with IBM’s targets. Big Blue also reiterated its full-year free [cash flow forecast](https://www.financedigest.com/xerox-shares-slide-as-annual-revenue-cash-flow-forecasts-take-a-hit.html "Xerox shares slide as annual revenue, cash flow forecasts take a hit") of $10.5 billion.

Investors blew a sigh of relief that IBM’s [quarterly update was better than feared,”](https://www.financedigest.com/logitech-quarterly-sales-fall-22-as-slowdown-fears-bite.html "Logitech quarterly sales fall 22% as slowdown fears bite") said Jesse Cohen, senior analyst at Investing.com.

The IT industry is facing a slowdown after a post-pandemic surge in demand for services such as consulting, as high inflation and [interest rates](https://www.financedigest.com/ecb-raises-interest-rates-again-cuts-bank-subsidies.html "ECB raises interest rates again, cuts bank subsidies") have forced customers to put the brakes on spending. [Growth at IBM’s consulting and software business](https://www.financedigest.com/uk-businesses-call-for-looser-immigration-rules-to-boost-growth.html "UK businesses call for looser immigration rules to boost growth") has also slowed down from the mid-to-high teens it saw last year.

IBM Chief Executive Officer Arvind Krishna said clients were prioritizing [digital transformation](https://www.financedigest.com/digital-transformation-in-corporate-lending-the-whole-is-greater-than-the-sum-of-its-parts.html "Digital transformation in corporate lending. The whole is greater than the sum of its parts") projects that focus on “cost takeout, productivity and quick returns”, mirroring comments by Accenture executives last month.

As a result, IBM [cut its full-year consulting revenue growth forecast](https://www.financedigest.com/traders-cut-ukraine-2022-combined-grain-and-oilseeds-crop-forecast.html "Traders cut Ukraine 2022 combined grain and oilseeds crop forecast") to 6%-8% from earlier expectations of high single-digit percentage growth.

It [forecast annual](https://www.financedigest.com/britains-kingfisher-sees-annual-profit-towards-higher-end-of-forecasts.html "Britain’s Kingfisher sees annual profit towards higher end of forecasts") revenue growth between 3% and 5% at constant currency, having said in January it expected revenue to rise at the lower-end of its mid-single-digit target. Analysts on average [expect a 3.6% growth](https://www.financedigest.com/mild-sourness-products-is-expected-to-fuel-growth-of-sour-sugar-market-in-coming-years.html "Mild Sourness Products Is Expected To Fuel Growth Of Sour Sugar Market In Coming Years"), according to Refinitiv data.

Analysts, however, believe IBM is better equipped to weather cuts in [corporate IT spending](https://www.financedigest.com/how-can-you-breathe-new-life-into-your-corporate-spend.html "How can you breathe new life into your corporate spend?").

IBM also has less exposure to U.S. regional banks and is largely shielded from the banking crisis in the country, with Chief Financial Officer James Kavanaugh noting regional banks make up less than 1% of the [company’s revenue](https://www.financedigest.com/examination-and-surgical-gloves-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2030.html "Examination and Surgical Gloves Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2030") in the United States.

Total revenue in the first quarter rose 4.4% at constant currency to $14.25 billion, compared with analysts’ [estimate of $14.35 billion](https://www.financedigest.com/electric-kick-scooter-market-is-projected-to-reach-6-5-billion-by-2031-and-estimated-to-grow-at-11-5-cagr-between-2021-and-2031.html "Electric Kick Scooter Market is Projected to Reach .5 billion by 2031, And estimated to grow at 11.5% CAGR between 2021 and 2031").

Excluding items, it [reported earnings of $1.36 per share](https://www.financedigest.com/tim-shares-slide-as-reported-grid-bids-disappoint.html "TIM shares slide as reported grid bids disappoint"), beating estimates of $1.26.

(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna Chandra Eluri)


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