IBM Q4 2024 Earnings: 5 Things To Know
AI momentum, Red Hat acceleration and HashiCorp updates are among the most likely topics to come up.
Momentum in artificial intelligence. Acceleration in the Red Hat business. And updates to closing the $7 billion acquisition of HashiCorp.
These are some of the most likely subjects to come up Wednesday when IBM’s leadership reports earnings for the Armonk, N.Y.-based vendor’s fourth fiscal quarter earnings, covering the quarter ended Dec. 31.
IBM could be looking at fourth fiscal quarter revenue of $17.5 billion, coming just under Wall Street’s expected $17.6 billion, mostly due to foreign exchange rates, Bank of America said in a report this month.
[RELATED: IBM Looks To Purchase Oracle Consultancy Amid HashiCorp Scrutiny]
IBM Q2 Earnings
IBM CEO Arvind Krishna and his leadership team could forecast $14.6 billion in revenue for the next reported quarter, according to Bank of America.
For 2025, however, IBM could be looking at 7 percent year over year growth in 2025 ignoring foreign exchange, ahead of Wall Street expectations, with free cash flow of $12.6 billion, according to Bank of America.
Here’s more of what partners can expect during IBM’s latest quarterly earnings report this week.
AI Momentum
On Wednesday’s call, IBM executives will likely have updates for analysts around the vendor’s momentum in the artificial intelligence space, a field IBM solution providers have played a key role in.
The vendor’s enterprise AI business $1 billion quarter to quarter in October, with a book of business related to generative AI exceeding $3 billion inception to date. Analysts will await more news of growing IBM AI excitement from customers.
Recent AI news from IBM includes the upcoming release of Rise with SAP on IBM Power Virtual Server, which aims to support AI-powered business processes and working with AI hyperscaler CoreWeave to train the next generations of IBM’s Granite AI models, according to IBM.
2025 Product Cycles
While PC sellers have their attention on a potential mass device refresh with AI-powered devices on the market and Windows 10 end of support coming, IBM partners have a series of major releases expected this year.
One of the most notable releases will be z17, prompting a mainframe refresh cycle–although at least one analyst firm foresees short-term pain for z16 partners.
Fourth fiscal quarter IBM infrastructure revenue may have fallen 9 percent year over year due to IBM’s waning z16 mainframe cycle, with z17’s expected release in mid-2025, according to Bank of America. The firm predicts IBM infrastructure revenue falling 5 percent year over year in the first fiscal quarter.
The segment should look better the rest of 2025, with the firm modeling 6 percent growth year over year for IBM infrastructure for all of fiscal year 2025.
The refresh cycle could fuel 5 percent growth year over year in IBM’s infrastructure business for the 2025 calendar year, according to Morgan Stanley’s report this month. IBM enterprise license agreement (ELA) activity in the second half of 2025 could fuel 8 percent year over year growth in IBM’s software business.
VARs ranked IBM among the best performing hardware vendors for expected 2025 growth year over year with 2.6 percent expected growth, with the mainframe refresh and ELA cycle contributing factors, according to the Morgan Stanley report.
For comparison, Dell VARs expect 3.1 percent growth year over year, Logitech VARs expect 2.8 percent and HP VARs expect 1.4 percent growth year over year, according to the report.
HashiCorp Updates
Analysts will likely seek updates from IBM leadership on closing the vendor’s nearly $7 billion acquisition of Terraform creator and cloud provider HashiCorp, announced back in April.
IBM had plans to close the deal last year. But the deal received scrutiny from the U.K.’s Competition and Markets Authority at the start of 2025. On Jan. 21, the Australian Competition and Consumer Commission (ACCC) published a letter seeking information from the public about the acquisition, with a Feb. 4 closing date for submissions and ACCC results provisionally set for March.
Bank of America appeared optimistic in IBM closing the HashiCorp deal soon, even factoring HashiCorp –plus strength in Red Hat and the transaction processing business–as part of the firm’s expected 7 percent revenue growth year over year in IBM software in 2025.
In December, HashiCorp reported its third fiscal quarter results, revealing $173.4 million in revenue during the quarter, an increase of 19 percent year over year.
HashiCorp saw gross profit using Generally Accepted Accounting Principles (GAAP) of $143.6 million in the quarter and an operating loss of $29.9 million–a 46 percent improvement over the $55.6 million operating loss experienced in the same period the year prior.
The vendor’s GAAP net loss was $13 million in the third quarter, a 67 percent improvement over the $39.5 million net loss experienced in the same period a year prior.
Third fiscal quarter remaining performance obligation (RPO) using GAAP was $775.4 million, up 14 percent year over year, according to HashiCorp.
Red Hat Acceleration
Speaking of Red Hat, eyes will be on whether this IBM subsidiary continues to ride a wave of momentum from AI and from VMware customers looking for a different vendor.
On Monday, Red Hat announced updates to its partner program–still separate from IBM’s–including an upcoming “build” module for Red Hat system integrator and technology partners and integrated go-to-market (GTM) activities within partner program modules.
Red Hat also closed this month on its acquisition of GenAI inference workloads accelerator Neural Magic and made improvements to its product portfolio including the introduction of Red Hat OpenShift confidential containers on bare metal and the Red Hat OpenShift Virtualization Engine for virtualization workloads.
VARs expect Red Hat to see 3.3 percent growth year over year in 2025, according to Morgan Stanley’s January report. That expectation represents accelerating growth from 2024.
Based on expected strong bookings, AI industry trends and Red Hat potentially taking market share from VMware, Bank of America expects mid-teens revenue growth for the IBM subsidiary in the fiscal year, according to a report this month.
IBM Consulting Improvements?
IBM Consulting–No. 6 on CRN’s 2024 Solution Provider 500–saw flat growth the prior quarter and possibly continued to face spending issues during the final quarter of 2024. But IBM acquisitions aimed at boosting consulting capabilities could bode well for this division.
Earlier this month, IBM said it expects to close this quarter the purchase of global consultancy Applications Software Technology, boosting IBM Consulting capabilities in Oracle Cloud especially for public sector customers.
The AST deal comes shortly after buying a separate Oracle services provider, Bellevue, Wash.-based Accelalpha. Last year, IBM’s consulting-minded purchases included Japan-based Amazon Web Services consultancy Skyarch Networks and assets from British software and services provider Advanced.
At least one analyst firm pointed out a potential threat to IBM’s business from cloud and AI cannibalization. A survey of chief information officers (CIOs) showed that IBM could lose share over the next three years as more workloads shift to the cloud, according to Morgan Stanley’s report this month.
Along with cloud cannibalization, the firm said in its report that IBM leadership “still has to alleviate concerns on AI cannibalizing spend on IBM Consulting,” with AI consulting bookings possibly cannibalizing discretionary spending.
Discretionary spending pressure in the fourth fiscal quarter could mean IBM Consulting revenue fell 2 percent year over year, according to Bank of America’s report this month. Revenue could fall another percent in 2025’s first fiscal quarter.
Consulting’s fortunes could improve throughout 2025 thanks to the rise of AI, backlog conversion, acquisition activity and a better spending environment, according to Bank of America. The firm predicts 2 percent growth year over year in the second fiscal quarter followed by 5 percent growth year over year in the third quarter and in the fourth.