Investors Cheer IBM's Q3 Earnings Beat, Higher FY22 Revenue Expectation and $10B Free Cash Flow

IBM IBM delivered third-quarter Non-GAAP EPS of $1.81, which beat the consensus of $1.78. It clocked Q3 revenue of $14.11 billion (+6% Y/Y), beating the analyst consensus of $13.55 billion.

Revenue breakup: Software revenue of $5.8 billion was up 7.5% (up 14% at constant currency with about 8 points from sales to Kyndryl), Consulting revenue of $4.7 billion was up 5.4% (up 15.6% at constant currency), and Infrastructure revenue of $3.4 billion was up 14.8% (up 23.1% at constant currency and about 9 points from sales to Kyndryl).

IBM ended the third quarter with $9.7 billion of cash on hand (which includes marketable securities), up $2.2 billion from year-end 2021. It generated $1.9 billion in Q3 operating cash flow.

Debt, including IBM Financing debt of $11.2 billion, totaled $50.9 billion, down $0.8 billion since the end of 2021.

Full-Year 2022 Expectation: The company now expects constant currency revenue growth above its mid-single digit model. The company continues to expect an additional contribution of approximately 3.5 points from sales to Kyndryl, concentrated in the first three quarters. 

At mid-October 2022 foreign exchange rates, currency is expected to be about a seven-point headwind.

Free Cash Flow: The company continues to expect about $10 billion in consolidated free cash flow.

Price Action: IBM shares traded up 3.86% at $127.32 in the after-hours session on the last check Wednesday.

Photo via Wikimedia Commons.