Not one to miss out on a year of AI-themed results presentations, the topic took up a significant chunk of IBM’s Q4 earnings call.
Big Blue delivered three per cent revenue growth over the quarter, while software revenue was up two per cent.
CEO Arvind Krishna highlighted the progress made in recurring revenue and IBM’s consulting book, which grew 5.5 per cent over the quarter.
As expected, the earnings call’s significant focus was on IBM’s progress in AI.
Krishna highlighted the successful launch of Watsonx, IBM’s flagship AI and data platform. Introduced in the fourth quarter, Watsonx governance drove a substantial portion of IBM’s book during the period.
Krishna said: “Last quarter, I shared with you that our book of business in the third quarter related explicitly to generative AI, and Watsonx was in the low hundreds of millions.
Since then, demand has continued to increase, and our book of business in the fourth quarter is roughly double the third-quarter amount.
“We continue to have thousands of hands-on client interactions, including an acceleration in pilots completed during the quarter. Software transaction revenue and SaaS ACV was approximately one-third of our book of business related to generative AI in the fourth quarter, and two-thirds were consulting signings.”
Despite an uneven macro environment, IBM’s consulting business demonstrated durable revenue growth throughout the year.
This is significant, as the company’s early wins with AI have been largely consulting-driven, in line with analyst predictions.
Strategic partnerships with industry leaders such as SAP, AWS, Microsoft, Salesforce, and Adobe were also highlighted during the call.
Collaborations, such as embedding watsonx into Adobe’s platform, deepen these partnerships and showcase IBM’s relevance in the evolving technology landscape.
CFO Jim Kavanaugh noted a slightly larger-than-expected drop in transactional revenue but pointed to ‘encouraging’ future growth indicators.
IBM’s software segment experienced two per cent growth, driven by recurring revenue and transaction processing.
The hybrid platform and solutions, including Red Hat, ticked up just a per cent.
“In Red Hat, revenue performance was similar to last quarter as we continue to see dampened growth in consumption-based services, Kavannaugh commented.
“Our future growth indicators are encouraging. Red Hat annual bookings were up 17 per cent, including double-digit booking growth across all three key offerings: RHEL, OpenShift, and Ansible.
Red Hat’s annual bookings were up 17 per cent, and the platform-based approach resonated well with clients.
