IBM expects to exceed annual revenue target on resilient cloud momentum By Reuters

By Chavi Mehta

(Reuters) -IBM Corp beat quarterly revenue estimates on Wednesday and said it expects to exceed full-year revenue growth targets as robust demand for its digital services helps cushion the blow from a strong dollar.

The IT software and services provider has been focusing on the so-called “hybrid cloud” after spinning off its legacy IT-managed infrastructure business and posted double-digit growth across all its segments and geographies on a constant-currency basis for the third quarter.

The company’s shares rose 6% in trading after the bell.

IBM (NYSE:), whose cloud revenue rose 11% to $5.2 billion in the quarter, now expects its annual revenue to increase more than its previous estimate of mid-single-digit growth at constant currency.

While enterprise spending is robust in the Americas, IBM is seeing some softness in its key areas such as new bookings and backlog churn in Western Europe due to the macroeconomic environment there, Chief Financial Officer James Kavanaugh told Reuters.

Industry experts largely view digital transformation projects serviced by the likes of IBM to be resilient in an economic slowdown as more businesses turn to technology to reduce costs.

Still, this year’s near 17% surge in the dollar is chipping away at the company’s earnings, mirroring a trend seen at peers Microsoft Corp (NASDAQ:), Accenture (NYSE:) and Salesforce (NYSE:) Inc that also have sprawling international operations.

IBM, which makes 60% of its revenue from outside the United States, increased its full-year estimate for foreign exchange impact to 7% from 6%.

The company booked a forex hit of $1.1 billion in the third quarter.

Revenue came in at $14.12 billion, compared with $13.51 billion expected by analysts, according to Refinitiv data.

IBM swung to a net loss of $3.20 billion, or $3.54 per share, in the third quarter, compared with a profit of $1.13 billion, or $1.25 per share, a year earlier, due to a one-time, non-cash pension settlement charge of about $5.9 billion.