IBM finance chief James Kavanaugh on Wednesday said delayed software deals that rattled investors in the last quarter were beginning to close, as the company lifted its forecast for the business and reported better-than-expected third-quarter earnings.
In an interview with Reuters, Kavanaugh said IBM now expects annual software revenue growth of about 7 percent to 8 percent, up from 6 percent to 8 percent previously. IBM’s shares rose about 4 percent in extended trading.
Third-quarter revenue rose 4.7 percent to $17.10 billion, above analysts’ average estimate of $16.82 billion, according to data compiled by LSEG.
Adjusted profit came in at $2.95 per share, beating estimates of $2.86 per share.
CEO Arvind Krishna had said in July that IBM had “faltered” in adapting to a shift in customer spending from software to data-center infrastructure, triggering its steepest one-day share drop in over a century.
Software revenue rose 8.3 percent to $7.80 billion in the third quarter, topping estimates of $7.62 billion.
Within the segment, sales in its hybrid cloud unit grew 11 percent and transaction processing software revenue rose 9 percent, rebounding from an unexpected decline last quarter.
Kavanaugh said about 25 percent of the transaction processing revenue came from deals deferred from the second quarter and “the remaining 75 percent is net new business.” Infrastructure revenue rose 4.2 percent to $3.71 billion, as 31-percent growth in distributed infrastructure, which includes servers and storage systems, helped offset weakness in its Z mainframe business.
