IBM delivers strong Q1, maintains outlook

IBM reported a better-than-expected first quarter and said it saw strong sales of infrastructure due to hybrid cloud and IBM Z systems. Software revenue was up 11% in the first quarter.

The company reported first quarter earnings of $1.2 billion, or $1.28 a share, on revenue of $15.9 billion, up 9%. Non-GAAP earnings were $1.91 a share.

Wall Street was expecting IBM to report first quarter earnings of $1.81 a share on revenue of $15.65 billion.

"As clients scale use cases, AI continues to be a tailwind for our global business. IBM products and services are helping clients orchestrate, deploy and govern AI across hybrid environments," said IBM CEO Arvind Krishna.

Here's a look at IBM by unit in the first quarter.

• Infrastructure revenue in the first quarter was $3.3 billion, up 15%. Hybrid infrastructure was up 28% and IBM Z, the company's mainframe platform, was up 51%. Distributed infrastructure was up 17%.

• Software revenue was $7.1 billion, up 11% in the first quarter. Red Hat revenue was up 13% with automation up 10% and data up 19% due to the Confluent acquisition.

• Consulting revenue was $5.3 billion, up 4%.

As for the outlook, IBM projected full-year constant currency revenue growth of more than 5% and a $1 billion full year free cash flow increase.

Speaking on the earnings call, Krishna said:

• "While we are operating in a dynamic environment, Middle East developments didn't impact us in the first quarter. Uncertainties remain, but our diversity across businesses, geographies, industries and large enterprise clients position us well. Conversations we are having with clients remain consistent. Enterprises are investing in capabilities that increase resiliency, productivity and accelerate growth. They are modernizing core systems. They are scaling AI and they're making deliberate choices about where workloads should run and who controls the infrastructure underneath them."
• "AI will run everywhere across public cloud, private and sovereign clouds and on-premise. The core challenge is making all of this work together. This includes orchestrating across models, agents and workflows, governing enterprise data and securing these systems at scale."
• "We continue to make progress in quantum and remain on track to deliver the first, large-scale fault-tolerant quantum computer by 2029."
• "We also released a new blueprint for quantum-centric supercomputing that outlines the architecture for integrating quantum and classical systems at scale. We strongly believe that our partners will achieve the first examples of quantum advantage this year, leveraging IBM hardware."