IBM up in Q4 on AI consulting and software

For enterprise AI, “Flexibility of deployment is key,” according to IBM CEO Arvind Krishna

IBM this week reported a 4% year-over-year increase in revenue to $17.4 billion in the fourth quarter, and full-year revenue up 2% to $61.9. In prepared remarks, CEO Arvind Krishana primarily attributed the growth to enterprise interest in using artificial intelligence (AI), which is driving business to IBM’s consulting and software businesses. 

In his prepared remarks, Krishna recalled the third quarter disclosure that generative AI (gen AI) revenues related to its WatsonX platform were in the low hundreds of millions. Since then, he said, that line of business has roughly doubled. WatsonX can be used to train, tune, validate and deploy AI models. 

“Our approach to AI for business is resonating,” Krishna said. He noted IBM’s approach to providing its own model and supporting open-source as well as proprietary models. “Simply put, we meet clients where they are, and allow clients to deploy AI models across multiple environments.” 

With regard to IBM’s massive consulting business, Krishna said it “will be an early beneficiary of AI. We are the only provider today that offers both a technology stack with our WatsonX platform and consulting services for deploying and managing generative AI.” He said early client work is focused on architecture, security and governance, all areas IBM sees as requiring “consulting expertise.” He likened the development of the AI consulting business to the spike in consulting engagements following IBM’s acquisition of RedHat; in that case IBM also offered the tech stack and the consulting know-how to operationalize it. “We are on a similar trajectory with generative AI. Consulting is a core driver of our value proposition for clients.” 

For more detail on how IBM is thinking about bringing gen AI into the telco space, check out this in-depth interview with IBM’s Stephen Rose, general manager of global industries. 

In the most recent quarter, IBM reported software revenue up 3%, consulting revenue up 6% and infrastructure revenue up 3%, all as compared to the year-ago quarter. For full year 2023, the company was up 5% in software, 5% in consulting and down 4% in infrastructure. 

Click here for the full financial details. 

Back to Krishna for commentary on last year and the year ahead. “I expect many macro trends to be similar to 2023. Technology demand will continue to be strong and serve as a major driving force behind global economic and business growth. It allows businesses to scale, offer better services, drive efficiencies and seize new market opportunities…For 2024, we expect performance in line with our mid-term model with mid-single digit revenue growth and about $12 billion of free cash flow. This keeps us firmly on a path of sustainable growth.”