IBM Grows Free Cash Flow but Will Likely Miss 2024 Goal
Following the spinoff of its managed infrastructure services business, which removed around $19 billion of less-than-desirable revenue from the income statement, International Business Machines (NYSE: IBM) is a leaner and more focused company. Hybrid cloud, artificial intelligence, high-margin software, and consulting are the businesses that will drive revenue and profit growth in the coming years.
IBM's fourth-quarter results offered a demonstration of what the "new IBM" looks like. Total revenue was up 6% adjusted for currency, with over 70% of that revenue coming from software and consulting. Pre-tax profit margin expanded by 1.7 percentage points, driven by growth and margin expansion in the software and consulting segments. Revenue from Red Hat, which forms the foundation of the company's hybrid cloud platform, jumped by 15%.
Revenue growth and improvements in margins are always good, but cash flow is how IBM funds its dividend, reduces its debt, pays for acquisitions, and makes capital investments. On that front, IBM's results and outlook were impressive. The company generated $9.3 billion of free cash flow in 2022, an improvement of $2.8 billion over 2021.
Source Fool.com