IBM expects to hit top end of forecasts despite Russia hit

Cloud revenue grew 14% in first quarter outpacing software and consulting businesses

IBM said on Tuesday it expects to hit the top end of its revenue growth forecast for 2022 even as it accounted for a hit of a "few hundred million dollars" from the suspension of its business in Russia.

IBM expects the impact from Russia to be less than "half a percent" of total revenue last year, or a little over $200 million (€185 million), chief financial officer James Kavanaugh told Reuters. Servers from IBM, Dell Technologies and Hewlett Packard Enterprise top the market in Russia.

IBM had generated “a couple hundred million dollars” in profit from the region last year, Mr Kavanaugh said.

The century-old company said it expects to hit the higher end of its mid-single-digit revenue growth forecast for this year, after it trounced first-quarter estimates for revenue, energized by its focus on cloud services amid higher global spending on technology.

IBM’s revenue grew 3.9 per cent in 2021. Analysts on average expect annual revenue of $60.69 billion, which implies a 5.8 per cent rise from last year, according to IBES data from Refinitiv.

Having shed its large and laggard IT managed infrastructure business last year, IBM has placed its bets on high-growth software and consulting businesses with a focus on the so-called “hybrid cloud” to put an end to its years of stagnating revenue growth.

Hybrid cloud, in which enterprises use a combination of their own data centres and leased computing resources to store and process data, lets IBM take a dip in the lucrative enterprise cloud market without having to directly compete with large providers such as Amazon. com's AWS and Microsoft's Azure.

IBM’s cloud revenue grew 14 per cent to $5 billion during the quarter ended March 31st. Revenue from software and consulting segments, which make up over 70 per cent of IBM’s business, rose 12 per cent and 13 per cent, respectively.

Total revenue rose 8 per cent to $14.20 billion during the quarter, beating estimates of $13.85 billion. – Reuters