What happened

Shares of IBM (IBM -0.86%) popped 7% on Wednesday after the technology titan delivered stronger-than-expected sales and profits.

So what

IBM's revenue rose 8% year over year to $14.2 billion in the first quarter. Sales to Kyndryl, the managed IT services business IBM divested in November, accounted for 5 percentage points of that growth.

Software and consulting sales were bright spots. Sales in these segments jumped 12% and 13%, respectively, to $5.8 billion and $4.8 billion. The gains were fueled by strong demand for IBM's hybrid cloud offerings, which help companies integrate their private IT operations with public cloud-computing platforms operated by the likes of Microsoft and Alphabet. All in all, IBM's hybrid cloud revenue leaped 14% to $5 billion, placing it at a greater than $20 billion annual run rate.

A person is looking pensively at a cloud-shaped object.

Image source: Getty Images.

IBM's adjusted earnings from continuing operations increased 25% to $1.40 per share. That bested Wall Street's forecast, which had called for adjusted earnings per share of $1.38. 

Better still, the tech-giant's cash flow production remained robust. IBM generated $1.2 billion in free cash flow. This, combined with the more than $10 billion in cash reserves on its balance sheet, allowed IBM to reward shareholders with $1.5 billion in dividend payments.

Now what

These solid results prompted IBM to boost its full-year financial outlook. Management is now guiding for revenue growth at the high end of its previously forecasted mid-single-digit range. The company also reiterated its projection for as much as $10.5 billion in free cash flow in 2022.

"In the first quarter we continued to strengthen the fundamentals of our business, consistent with our medium-term model," chief financial officer James Kavanaugh said in a press release. "We are a faster-growing, more profitable company with a higher-value business mix, a significant recurring revenue base, and strong cash generation."