Technology powerhouse IBM (NYSE:IBM) published its first-quarter earnings report on Monday evening. The results came in above Wall Street's expectations, sending IBM shares as much as 5% higher on Tuesday morning.
IBM's first-quarter sales increased 1% year over year, landing at $17.7 billion. Cloud-based revenues rose 21% to $6.5 billion, and the Red Hat division's sales jumped 17% higher. Your average analyst would have settled for total sales near $17.3 billion.
Earnings fell 4% to $1.77 per diluted share. Analysts had been looking for approximately $1.63 per share. Adjusted free cash flows came in 57% higher at $2.2 billion, backing out $600 million of cash costs related to the company's ongoing restructuring effort. Management's full-year guidance was unchanged, pointing to adjusted free cash flow of roughly $11.5 billion and positive revenue growth.
This spin-off of IBM's managed infrastructure services as a new company called Kyndryl is scheduled before the end of 2021. Hybrid cloud services and artificial intelligence products are doing the heavy lifting behind IBM's projected growth this year. The cloud-based platform serves as a springboard for cross-selling of additional services.
"For every dollar of platform spend, clients spend $3 to $5 in software, and $6 to $8 in services. IBM, together with our growing ecosystem partners, are positioned to capture that value," IBM CEO Arvind Krishna said on the earnings call. "Our objectives are clear: sustainable mid-single digit revenue growth post separation and strong cash generation."