By Chavi Mehta
(Reuters) – IBM Corp on Wednesday reported its highest annual revenue growth in a decade and beat Wall Street expectations for the fourth quarter, as more businesses sought to streamline operations and cut costs amid an economic downturn.
The IT software and consulting firm also forecast annual revenue growth in the mid-single digits in constant currency terms, lower than the 12% it reported for 2022 but in line with medium-term targets announced in 2021.
Analysts have expressed concerns about whether IBM would be able to pull it off, given the troubled macroeconomic environment.
Big Blue’s prediction of slower growth comes after a pandemic-induced boom as companies began digitizing their operations. Now, rising borrowing costs and recession fears are forcing businesses to cut spending.
IBM in October saw sensitivity to new bookings in Western Europe, while peer Accenture Plc also saw weakness in its consulting business. Cognizant Technology Solutions Corp in November cut its forecast for 2022 due to shrinking contracts.
But IBM Chief Financial Officer James Cavanaugh told Reuters on Wednesday that the company sees its consulting business growing in terms of cloud spending. Its deal signings doubled in 2022 to build services with hyperscale partners such as Amazon.com’s AWS and Microsoft’s Azure, it said.
“I cannot stress enough that several … enterprise customers are looking at how they can better optimize their application portfolio and consumption requirements.”
Analysts also expect digitization and cloud-related contracts to remain more resilient than other IT projects.
IBM’s full-year revenue rose 5.5% to $60.53 billion thanks to its shift to a so-called “hybrid cloud” strategy – where the company helps clients build their own data centers and use leased computing resources.
Hybrid cloud revenue rose 2% to $6.3 billion in the reported quarter.
The 110-year-old company, which makes more than half of its revenue outside the United States, said it expects a currency-neutral impact on its business this year as the U.S. dollar weakens. It earned a foreign exchange hit of more than $1 billion during the fourth quarter.
Total revenue growth was flat at $16.69 billion in the quarter ended Dec. 31, compared with analysts’ estimates of $16.40 billion, according to Refinitiv data.
Graphics: IBM Reports Biggest Annual Revenue Growth in a Decade | https://www.reuters.com/graphics/IBM-RESULTS/gdvzqwomjpw/chart.png
(Reporting by Chavi Mehta in Bengaluru; Editing by Devika Syamnath)