Despite the post-pandemic slowdown hitting much of the tech industry, strong performances in software and consulting contributed to IBM’s first-quarter earnings and earnings growth.
Both IBM’s software and consulting revenues increased 3% year-over-year. In the software segment, Red Hat, IBM’s enterprise Linux division, grew 8%, while application operations posted the highest growth in the consulting segment, up 7%.
IBM’s earnings report, issued late Thursday, showed strong performance in software and consulting led to a 26% increase in gross profit to $927 million in the quarter ending March 31, with revenue up 0.4%. of $14.3 billion. The strong dollar had a negative impact on sales—IBM’s revenue increased by 4% in constant currencies at constant currency.
IBM currently derives about three-quarters of its annual revenue from technical services, but the company is seeing some slowdown in consulting from its previously robust growth levels, said chairman and CEO Arvind Krishna. said in a call with analysts after the results were announced.
“These days, clients are prioritizing digital transformation projects focused on cost reduction, productivity and rapid returns,” he said.
This trend was also reflected in IBM’s Infrastructure segment, which declined 3.7% year-over-year. In the hybrid infrastructure business, z Systems revenue increased 7%. This was due to the availability of the z16 in the fourth quarter, and its performance outperformed previous cycles as customers leveraged the z16 for AI at scale and energy efficiency, Krishna said. told analysts.
Focus on artificial intelligence
Commenting on IBM’s continued efforts, Krishna said hybrid cloud and artificial intelligence will be priorities this year to drive both business outcomes and innovation.
He notes that AI is projected to add $16 trillion to the global economy by 2030, but the need for more accurate results, reliable data, and governance tools will limit the use of AI within the enterprise. He pointed out that the case is very different from the AI offered to consumers.
“There is a growing interest in using companies and AI to increase productivity and reduce costs,” Krishna said. “By using AI to transform workflows into simpler, automated processes, companies can increase productivity.”
Krishna said IBM will focus on using AI to help organizations enhance internal audit and compliance processes and automate call center responses to improve accuracy and customer satisfaction.
GLOBALFOUNDRIES LITIGATION
On the same day that IBM reports its first quarter 2023 results, chip maker GlobalFoundries files a lawsuit against the company for illegally sharing confidential intellectual property and trade secrets with Japanese chip maker Rapidus. announced.
IBM announced it had developed a 2nm chip in 2021 and announced a partnership with Rapidus late last year to bring 2nm chips to commercial production in Japan. Chips manufactured on the 2nm manufacturing process are expected to be used in a wide range of applications and machines, from laptops to high-performance computing servers, with optimized performance to reduce the carbon footprint of data centers. .
The GlobalFoundries complaint alleges that IBM unlawfully disclosed secret IP and trade secrets after IBM sold its microelectronics business in 2015.
The company also alleges that IBM is poaching GlobalFoundries’ engineering staff for “illegal recruitment.” It claims that trend has accelerated since a partnership with Rapidus was announced in December 2022.
GlobalFoundries seeks compensatory and punitive damages and an injunction against IBM to stop the “unlawful disclosure and use” of GlobalFoundries’ trade secrets. increase.
IBM has denied the allegations contained in its complaint in federal court for the Southern District of New York, which seeks compensatory and punitive damages from GlobalFoundries, as well as from IBM to prevent further disclosure and use of what GlobalFoundries deems to be trade secrets. I am seeking an injunction against
