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International Business Machines (IBM, Financial) shares jumped more than 13% on Thursday marking an All-time high of $260 after the company reported solid earnings for the fourth quarter of 2024. Analysts had expected adjusted earnings per share (EPS) of $3.78 and the company reported adjusted earnings per share (EPS) of $3.92. Quarterly revenue of $17.55 billion was slightly below the $17.56 billion anticipated.
The software part will perform very well, with revenue going up 10.4 percent year on year, reported at $7.9 billion. Red Hat's 16% growth and Automation service's 15% drove this growth. The company has focused on hybrid cloud and AI and that business, which is generative AI, generates over $5 billion in revenue, said CEO Arvind Krishna.
However, the consulting business found that it had a 2 percent dip in revenues as a result of client budget constraints in a wider economic uncertainty. The infrastructure segment, which too took a 7.6 percent hit, was battered by a 21 percent fall in IBM Z revenue that put an end to a product cycle.
With the challenges as stated above, IBM's free cash flow ($6.2 billion) makes for good liquidity for putting back into the business and into the shareholders' pockets. On the cash flow side, the company is projecting about $13.5 billion of cash flow for the full year 2025 with 5 percent of growth in revenue for the full year 2025.
Investors are well advised to watch for vulnerabilities in the areas of structural consulting and infrastructure. AI and the hybrid cloud trend line up with market needs and metatalents that will be essential to growing technology capabilities and staying competitive are strategic partnerships. That will be key to understanding how IBM can spur growth and respond to the market moves of the next decade.
This article first appeared on GuruFocus.