IBM Stock Gains on Strong Q1 Results

By Avi Ben Ezra Tuesday, April 20, 2021

IBM stock is up over 3% in the pre-market trading session today after the enterprise technology and services company reported better-than-expected earnings for its first quarter.

IBM building in London, UK.

Beat Across the Board

IBM stock is likely to gap higher at today's open and hit the highest levels in 14 months after the company reported earnings that exceeded analysts’ expectations. The IT company said it made a profit of $1.77 per share to easily exceed the $1.63 per share expected by surveyed analysts.

Business revenue for the quarter came in at $17.73 billion, again higher than the $17.35 billion the market analysts were calling for. The Q1 figures represent an increase of 0.9% rise in business revenue on a year-over-year (YOY) basis.

“Strong performance this quarter in cloud, driven by increasing client adoption of our hybrid cloud platform, and growth in software and consulting enabled us to get off to a solid start for the year," said Arvind Krishna, IBM chairman and CEO.

The company reported a decline of 1% in business revenues for its Global Technology Services business unit, which managed services, outsourcing, and support. Still, the reported $6.37 billion in Q1 business revenues topped the market estimates of $6.32 billion. The company is working to spin off a part of this business unit to become an independent company called “Kyndryl” later this year.

Other business sectors of the company also reported stronger-than-expected Q1 results. The Cloud and Cognitive Software unit saw its business revenue up by 4% to $5.44 billion (vs. the $5.3 billion expected).

The Global Business Services, which manages consulting services, generated $4.23 billion in business revenue. This represents an increase of 2% compared to a year-ago period and higher than the $4.03 billion consensus.

“This quarter, we saw an improved trajectory in project activity and client-based business volumes including in some of the industries most affected by the pandemic such as retail and consumer products. We had traction in areas like financial services where robust market volatility drove demand for increased capacity,” said Jim Kavanaugh, IBM’s finance chief.

Looking forward, Krishna said that he remains “confident” that the IT business can “achieve full-year revenue growth and meet our adjusted free cash flow target in 2021” to further boost the IBM stock performance in after-market hours. IBM maintained its previous guidance of revenue growth for the full year.

A strong performance came in the quarter when IBM announced it purchased 7Summits from the private equity company Sverica Capital Management. A few days later, the company announced the acquisition of the consulting company Taos, which is focused on cloud migrations.

Two months ago, Bloomberg reported that IBM has been considering a sale of its Watson Health business unit to allow the IT company to focus on faster-growing cloud computing operations.

IBM stock is trading about 4% up in April after gaining over 12% in March. This marks the best single-month performance for the IBM stock in the last 11 months.

Summary

IBM reported stronger-than-expected Q1 results as all business sectors performed ahead of the market expectations. A strong Q1 performance pushed the IBM stock more than 4% higher on pre-open Tuesday.

About the Author


Headshot of Avi Ben Ezra

Avi Ben Ezra is the CTO and Co-founder of SnatchBot and SnatchApp (Snatch Group Limited). He leads the Group’s long-term technology vision and is responsible for running all facets of the tech business which includes being the architect of the platforms and UI interfaces.

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