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IBM sales hit by slow client spending and lower-than-expected cloud revenue

International Business Machines Corp. reported lower-than-expected revenue in the most recent quarter due to a suspension of spending in the cloud business and some clients.

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According to FactSet, the cloud and cognitive software business revenues were $ 5.69 billion, below analysts’ forecast of $ 5.77 billion.

CEO Arvind Krishna admitted that the segment missed internal forecasts, but noted 17% revenue growth from IBM’s 2019 acquisition of software company Red Hat.

The acquisition of Red Hat laid the foundation for IBM’s decision to split into two and focus on fast-growing businesses such as cloud computing and artificial intelligence.

In a conference call to discuss the results, Krishna said the suspension of spending had primarily affected hardware and Kyndryl, a technology services company that IBM is spinning off, resulting in a slowdown in earnings.

IBM’s share price fell 4% in after-hours trading following the results. Until Wednesday’s closing price, IBM’s share price has risen 12.7% so far this year.

With the spin-off of traditional IT operations, information technology pioneers are gaining more attention to what is called a hybrid cloud. This allows customers to integrate their public cloud with their own private cloud or data center.

On Wednesday, IBM reported more than 3,500 users of hybrid cloud, compared to the more than 3,200 users reported when it announced its second-quarter results in July.

On a per-share basis, earnings in the third quarter fell to $ 1.25. Adjusted earnings of $ 2.52 per share met analysts’ expectations. IBM said it recorded a loss of about 56 cents per share in relation to the costs associated with the separation of Kyndryl.

Total sales for the September quarter increased from $ 17.56 billion in the year-ago quarter to $ 17.62 billion. Analysts polled by FactSet wanted $ 17.79 billion in revenue.

IBM said it expects mid-single-digit revenue growth at the end of 2021 and about $ 35 billion in free cash flow from 2022 to 24.

Write in Maria Armental (maria.armental@wsj.com)

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IBM sales hit by slow client spending and lower-than-expected cloud revenue

Source link IBM sales hit by slow client spending and lower-than-expected cloud revenue

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