Dive Brief:
- IBM earnings growth accelerated in the third quarter, bolstered by gains in the software and automation segments, the company said Wednesday. IBM reported $16.3 billion in revenue for the three months ending Sept. 30, marking a 9% growth and the highest year-over-year revenue increase in recent years.
- The company saw its largest increases in the infrastructure and software segments, partly due to rising demand in automation services and its Z mainframe series.
- “Clients are leaning on enterprise technologies to scale, innovate and drive productivity,” said CEO Arvind Krishna, speaking during the earnings call Wednesday. “There are always macro uncertainties, but overall, we continue to see broad-based demand from clients and remain optimistic.”
Dive Insight:
IBM has been vying for a piece of enterprise AI spend, offering up its hybrid cloud business to help satiate compute needs and tailoring its ubiquitous mainframe line for AI workloads.
The company has continued to lean into macro themes such as AI adoption and cloud, said Forrester Senior Analyst Dario Maisto, pointing to the company's partnership with AMD to combine high-performance processing and quantum computing.
“As the company stays focused on the latest tech trends, it will be interesting to see how this focus further translates into actual financial results,” said Maisto in an email to CIO Dive.
IBM has gained an advantage by presenting itself as a provider of governable, trustworthy AI, especially among large enterprises and businesses in highly regulated sectors, according to Craig Le Clair, VP and principal analyst at Forrester.
“It has successfully consolidated its various AI and data products under the single, unified watsonx brand but struggles with developer mindshare compared to the hyperscalers,” Le Clair said in an email. “Success will come from its consulting arm, which handles the complex integration and operating model changes required for AI Agent automation.”
Future bookings for AI services are indicating strong customer demand, executives said during the earnings call. Krishna pointed to the $9.5 billion book of business in generative AI to date as a sign of momentum, an area the vendor continues to invest in.
Earlier this month, IBM unveiled an AI-optimized integrated development environment, dubbed Project Bob. Available in a private tech preview, Project Bob automates software development tasks, including building, refactoring and testing.
Agentic AI, top of mind for most executives, is also on IBM's offering roster.
“In consulting, we are embracing disruption and leading the way with our digital assets and services as software strategy,” said Krishna. “While we are early in this journey, we have over 200 consulting projects using digital workers at scale.”
In addition to servicing customer demand in AI, the technology is accelerating internal productivity, according to Krishna. The company expects to achieve $4.5 billion in annual run rate savings this year, with AI as a key driver.
