International Business Machines Corp. (NYSE:IBM) stock was up 1.4% in premarket dealing to $139.01 after it delivered a top-line quarterly beat thanks to steady demand for IBM's software solutions and a surprisingly strong mainframe business.
Third quarter revenue was reported at $14.8 billion, up 5% year-on-year and slightly better than the $14.73 billion penciled in by Wall Street analysts.
Its bottom line also came in above expectations, with the company posting earnings per share of $2.20 compared to the $2.13 consensus.
The results suggest that IBM’s strategic focus on cloud services and software is starting to pay off.
IBM's early investment in AI applications for enterprises has positioned the company as a sought-after partner for clients looking to integrate artificial intelligence (AI) into their operations. The company has reported substantial interest in its software and consulting services in this context.
IBM's generative AI book of business, encompassing both actual sales and bookings, reached "low hundreds of millions of dollars" during the third quarter. Prominent clients such as Ernst & Young have contributed to this positive trend, according to IBM's Chief Financial Officer, James Kavanaugh.
The software segment, which now includes recently acquired IT budgeting software manufacturer Apptio, experienced an impressive 8% revenue growth (excluding the impact of a strong U.S. dollar). This growth underscores the value of IBM's expanding software portfolio in meeting evolving customer needs.
The company reaffirmed its annual revenue growth target and free cash flow generation.
Shares of IBM initially popped after hours Wednesday before settling down around 1.2% higher at $138.70.