IBM stock rallies after earnings, annual outlook top Wall Street view

IBM stock rallies after earnings, annual outlook top Wall Street view

Watson unit revenue surpasses Street expectations, but cloud sales do not as revenue declines for second consecutive quarter

International Business Machines Corp.’s stock rallied in the extended session Tuesday after the tech giant’s earnings and outlook topped Wall Street views.

IBM IBM, -1.05%  shares surged 6.4% after hours, following a 1.1% decline to close the regular session at $122.51. In comparison, the Dow Jones IndustrialDJIA, -1.22%  finished the day down 1.2%, the S&P 500 index SPX, -1.42% declined 1.4% and the tech-heavy Nasdaq Composite Index COMP, -1.91%  fell 1.9%.

The company reported fourth-quarter net income of $1.95 billion, or $2.15 a share, compared with a loss of $1.05 billion, or $1.14 a share, in the year-ago period. Adjusted earnings were $4.87 a share. Of the 18 analysts surveyed by FactSet, IBM on average was expected to post adjusted earnings of $4.82 a share.

Revenue declined to $21.76 billion from $22.54 billion in the year-ago quarter, the second consecutive quarter of revenue declines after IBM broke a long streak of year-over-year sales declines last year. Wall Street expected revenue of $21.73 billion from IBM.

For the quarter, IBM reported cognitive-solutions revenue of $5.46 billion, while analysts surveyed by FactSet expected $5.27 billion. Cognitive-solutions includes IBM’s Watson artificial-intelligence unit. Technology services and cloud-platform revenue declined to $8.93 billion, while analysts expected $9.04 billion. Technology services and cloud-platform includes IBM Cloud, formerly known as Bluemix.

Global business services revenue rose to $4.32 billion, while the Street expected $4.15 billion, and systems revenue fell to $2.62 billion, while analysts had forecast $2.77 billion. Global business services includes consulting for modernizing business design and enterprise and cloud applications, while the systems business includes operating-systems software and the company’s mainframe business, including IBM’s z14 line of servers.

For 2019, IBM said it expects adjusted earnings of “at least $13.90” a share; analysts had forecast $13.80 a share for the full year.

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