Consulting, software boost IBM revenue as it turns to AI

Strong performances in software and consulting helped IBM’s profit and revenue increase in the first quarter, even as a post-pandemic slowdown hit much of the technology industry.

IBM’s software and consulting revenue both rose 3% year over year. In the software segment, IBM’s enterprise Linux unit, Red Hat, saw growth of 8%, while application operations saw the highest level of growth in the consulting segment, rising by 7%.

The strong showing from software and consulting help boost total profit by a healthy 26%, to $927 million, and revenue by .4%, to $14.3 billion, for the quarter ending March 31, according to IBM’s earnings report, issued late Thursday. The strong dollar had a negative effect on sales — in terms of constant currency, taking out the effect of currency fluctuations, IBM revenue rose by 4%.

IBM now receives about three-quarters of its annual revenue from tech services, but the company is seeing some deceleration in consulting from the previous robust growth levels, chairman and CEO Arvind Krishna said on a call with analysts after the results had been published.

“More recently, clients are prioritizing digital transformation projects that focus on cost takeout, productivity and quick returns,” he said.

This trend was further reflected in IBM’s infrastructure segment, which was down 3.7% year on year; within the Hybrid Infrastructure business, z Systems revenue was up 7%. This was driven by fourth quarter z16 availability, with its performance having outpaced prior cycles due to customers leveraging it for AI at scale and energy efficiency, Krishna told analysts.