Strong software demand lifts IBM’s profits

IBM’s fourth-quarter profits exceeded expectations, driven by a surge in software demand as businesses increased IT spending. Shares rose by about 10% in extended trading, reflecting investor confidence in the company’s strategy.

The software unit posted its strongest revenue growth in five years, as companies prioritised cloud infrastructure to support data-intensive generative AI applications.

Revenue growth of at least 5% is expected for 2025, outpacing the previous year’s 3% rise. IBM’s AI-related business, covering bookings and sales, has grown to over $5 billion, gaining $2 billion in just one quarter.

The company made its ‘Granite’ AI models open-source, contrasting with rivals that charge for access, positioning itself as a leader in open AI development.

Software performance contrasted with weaker consulting results, which declined by 2% to $5.2 billion. Around 80% of IBM’s AI business comes from consulting, with the rest from software.

While businesses focus on integrating AI into long-term projects, this shift has yet to translate into higher consulting revenue. Overall, total revenue remained steady at $17.55 billion, aligning with analyst estimates.