‘We continue to gain momentum with our GenAI book of business growing to over $5 billion inception to date, up by about $2 billion quarter-over-quarter. Approximately one-fifth of this book of business comes from software, and the remaining four-fifths is consulting,’ says IBM CEO Arvind Krishna.
Generative AI is gaining fast strength at IBM, helping to drive momentum in its consulting business going forward, IBM CEO Arvind Krishna told financial analysts Wednesday.
Krishna, in his prepared remarks during IBM’s fiscal fourth quarter 2024 quarterly financial report, said he is confident the company’s investment in partnerships and skills along with its early leadership in GenAI position it to accelerate consulting growth.
“We continue to gain momentum with our GenAI book of business growing to over $5 billion inception to date, up by about $2 billion quarter-over-quarter,” he said. “Approximately one-fifth of this book of business comes from software, and the remaining four-fifths is consulting.”
IBM has developed a portfolio of offerings to meet most customers’ requirements, Krishna said.
“Our AI portfolio is tailored to meet the diverse needs of enterprise clients, enabling them to leverage a mix of models: IBM’s, their own, open models from Hugging Face, Meta, and Mistral. IBM Granite models, designed for specific purposes, are 90 percent more cost-efficient than larger alternatives. Additionally, REL (Red Hat Enterprise Linux) AI and OpenShift AI provide clients with a consistent and scalable AI foundation built on open source technology.”
Ever since IBM laid out what Krishna called its midterm model in 2021, the company met or exceeded its target metrics for revenue growth, profitability, and free cash flow growth.
“We set out a plan for mid-single-digit growth, and we delivered on it, growing our revenue by a 6-percent CAGR (cumulative annual growth rate) over this period,” he said. “All of our segments delivered revenue growth in line with our model. Over the last three years, software grew ahead of our goal of mid-single digits, and this momentum continued with 9-percent growth in 2024. We committed to accelerate the growth of Red Hat, and we delivered double digits for the year. Infrastructure performed in line with our model, as we invested in innovation and transformed the business model. Consulting met the model for high-single-digit growth, although we acknowledge 2024 was below model. We are confident that our investment in partnerships and skills, as well as our early leadership in GenAI position us to accelerate consulting growth as we move forward.”
IBM is currently watching a number of macroeconomic factors that could impact the overall IT business going forward, but expects technology to help mitigate related issues, Krishna said.
“[These include] geopolitical tensions, interest rate volatility, supply chain vulnerabilities, demographic shifts, evolving cyber threats, are creating headwinds for businesses worldwide,” he said. “In this context, technology is key to drive sustainable growth. IBM’s combination of advanced technology and deep consulting expertise positions us to uniquely deliver end-to-end business transformations.”
IBM enters 2025 intent on enhancing its portfolio, Krishna said.
“Our early leadership in generative AI and the consulting advantage platform have positioned us well in today’s evolving market,” he said. “In infrastructure, the Z16 [mainframe family] is our most successful program in history, highlighting customer adoption and continued reliance on the mainframe. We see more opportunities ahead as our infrastructure solutions play a crucial role in helping clients bring AI workloads closer to the data, and we will launch Z17 in the middle of 2025.”
IBM in the fourth fiscal quarter saw strong traction in its Watsonx middleware solution and [Watsonx] AI Assistant, including Watsonx.governance, Watsonx.ai, Watsonx Code Assistant for Z, Watsonx Orchestrate, as well as products embedding AI such as IBM’s Concert GenAI automation platform, Krishna said.
“Consulting remains key to designing and implementing AI use cases, driving Watsonx deployment,” he said.
IBM By The Numbers
For its fourth fiscal quarter 2024, which ended December 31, IBM reported total revenue of $17.55 billion, up slightly from the $17.38 billion the company reported for its fourth fiscal quarter 2023.
Overall revenue includes:
- Software revenue of $7.92 billion, up from last year’s $7.18 billion, which includes Red Hat revenue up 16 percent; automation revenue up 15 percent; data and AI revenue up 4 percent, security revenue up 5 per cent; and transaction processing revenue up 10 percent.
- Consulting revenue of $5.18 billion, down from last year’s $5.28 billion, including business transformation revenue up 1 percent, technology consulting revenue down 7 percent, and application operations down 4 percent.
- Infrastructure revenue of $4.26 billion, down from $4.60 billion, including IBM Z mainframe revenue down 21 percent, distributed infrastructure flat, and infrastructure support down 2 percent.
- Financing revenue of $170 million, down from $175 million.
- Other revenue of $29 million, down from $141 million.
IBM also reported GAAP net income of $2.92 billion or $3.14 per share.
For all of fiscal 2024, IBM reported total revenue of $62.75 billion, up from the $61.86 billion the company reported for its fiscal 2023.
IBM stock soared more than 8 percent in after-hours trading Wednesday to $248.55.
