(Bloomberg) — International Business Machines Corp. delivered a positive outlook for revenue and cash flow in 2024, an optimistic signal for the pace of corporate technology spending, and announced it expects to reduce jobs by a percentage in the low single digits.
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Free cash flow will be about $12 billion in the year ending in December, the Armonk, New York-based company said Wednesday in a statement. Analysts, on average, estimated $10.9 billion, according to data compiled by Bloomberg. Revenue will grow in the “mid-single digits,” the company said. Analysts projected about 3% sales growth.
IBM has focused on streamlining its operations around software and services in recent years, divesting managed infrastructure, weather and health businesses. The company also has introduced new products to capitalize on growing interest in artificial intelligence.
“Client demand for AI is accelerating and our book of business for watsonx and generative AI roughly doubled from the third to the fourth quarter,” Chief Executive Officer Arvind Krishna said in the statement, referring to the company’s AI platform.
IBM’s planned job cuts follow similar announcements in January by major tech companies, including Alphabet Inc.’s Google and Amazon.com Inc. Chief Financial Officer James Kavanaugh said IBM will likely spend the same amount on restructuring as it did last year — $400 million — when it reduced its workforce by about 3,900 jobs. Kavanaugh said, however, that the company continues to hire for certain positions and expects headcount to be about the same at year’s end. IBM had 288,000 employees at the end of 2023.
Shares gained about 3% in extended trading after closing at $173.93 in New York. The stock has increased 23% in the past 12 months.
Fourth-quarter sales gained 4.1% to $17.4 billion. Profit, excluding some items, was $3.87 a share. Analysts, on average, estimated revenue of $17.3 billion and adjusted earnings of $3.76 a share.
Consulting revenue increased 6% to $5 billion, just shy of analyst estimates of $5.1 billion. Investors have focused on weakness in this business unit in recent quarters as economic uncertainty weighed on customer appetites for large projects.
Software also came in just below expectations — $7.5 billion in the quarter ended Dec. 31, compared with $7.7 billion projected. Red Hat, the software division IBM acquired in 2019, posted sales growth of 8%, another comparatively slow period for a business that once regularly jumped more than 20% each quarter.
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