Please ensure Javascript is enabled for purposes of website accessibility

IBM Posts Great Results, Shares Jump

By Anders Bylund - Apr 20, 2021 at 4:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Big Blue leveraged fantastic cloud computing and artificial intelligence sales to beat Wall Street's expectations.

Technology powerhouse IBM (IBM 0.69%) 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.

A portrait-style photo of IBM CEO Arvind Krishna.

IBM CEO Arvind Krishna. Image source: IBM.

"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."

Anders Bylund owns shares of IBM. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

International Business Machines Corporation Stock Quote
International Business Machines Corporation
$134.93 (0.69%) $0.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.