IBM revenue rises despite concerns over AI
IBM’s revenue grew by 9% in the first quarter to $15.92 billion (€13.59 billion). Although this exceeded analysts’ expectations of $15.62 billion (€13.33 billion), it marked a slowdown compared with growth of 12.2% in the previous quarter. This weaker growth, particularly within IBM’s software segment, has stoked concerns about the potential impact of artificial intelligence on the company’s operations.
The launch of AI tools that can automate routine business functions has fuelled fears that these tools could displace traditional software solutions. IBM has been directly affected by these concerns following Anthropic’s announcement in February that one of its AI tools could modernise COBOL, a programming language widely used on IBM’s mainframe systems.
Despite these worries, IBM’s infrastructure segment posted strong growth, with revenue up 15.2% to $3.33 billion (€2.84 billion). This success was driven by continued uptake of the company’s latest mainframe systems. Analysts suggest that IBM’s established customer relationships and its own range of AI solutions, such as the Watsonx Code Assistant for mainframe modernisation, could help to mitigate the threat from competing AI tools.
Generative AI as an accelerator
IBM CFO James Kavanaugh said clients using the Watsonx Code Assistant were seeing accelerated growth in their mainframe usage. He described generative AI as an accelerator for mainframe modernisation, ultimately benefiting IBM’s overall mainframe portfolio.
Adjusted quarterly earnings came in at $1.91 per share, beating analysts’ estimates of $1.81. During a conference call following the earnings release, CEO Arvind Krishna played down the potential impact of the conflict in the Middle East. He said IBM had recorded its strongest growth in the region in decades and could still weather several weeks of any disruption caused by the closure of the Strait of Hormuz.
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