IBM shares jump on 72% growth in fourth-quarter net profit

IBM shares jumped as much as 6 per cent in extended trading on Monday as the company reported almost 72 per cent jump in its fourth-quarter net profit.

Net profit of the company rose to $2.3 billion, about $976 million more than the same period a year ago. It increased more than 106 per cent on a quarterly basis.

The company earned revenue of more than $16.6bn in the October-December period, nearly 6.5 per cent more than the prior year period, exceeding the analysts’ estimates of $16.1bn.

But it was down more than 5.2 per cent on a quarterly basis.

The company’s full 2021 financial year’s net profit rose 2.7 per cent to $5.7bn, while sales increased almost 4 per cent to $57.3bn.

It was the New York company’s best quarterly and full financial year growth since 2011.

“We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," said IBM’s chairman and chief executive Arvind Krishna.

"Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022.

Mr Krishna said he expected free cash flow to hover between $10bn and $10.5bn for 2022.

IBM’s software business added about $7.3bn in the fourth quarter. It was up by about 8.2 per cent year on year.

The consulting arm, which included business transformation, technology consulting and application operations, contributed $4.7bn, almost 13.1 per cent more than the prior year period.

The company’s infrastructure division earned $4.4bn in sales, nearly 0.2 per cent down on a yearly basis.

Global financing, which includes financing and used equipment sales, generated $200m, down 29.4 per cent annually.

IBM ended the year with $7.6bn of cash on hand (which included marketable securities), down $6.7bn from the end of 2020.

Its owings, including a financing debt of $13.9bn, were $51.7bn, down $9.6bn since the end of 2020, it said.

“In 2021, we continued to invest for the future by increasing R&D [research and development] spending, expanding our ecosystem and acquiring 15 companies to strengthen our hybrid cloud and AI [artificial intelligence] capabilities," said IBM’s senior vice president and chief financial officer, James Kavanaugh.

To strengthen its cloud and hybrid offerings, IBM purchased SXiQ – an Australian digital transformation services company that specialises in cloud applications, cloud platforms and cloud cyber security – in November.

In October, it announced plans to acquire the Adobe Workfront consulting unit and assets from Rego Consulting to strengthen its hybrid cloud and AI strategy.

In November, IBM separated its slower-growth business division – called Kyndryl – so it could focus more on the boom in demand for cloud services and better compete with Amazon and Microsoft.

Kyndryl started trading as an independent company on the New York Stock Exchange on November 4.

“With the separation of Kyndryl we now have taken the next step in the evolution of our strategy, creating value through focus and strengthening our financial profile,” Mr Kavanaugh said.