The company reported adjusted earnings of $4.71 a share on an adjusted 3% gain in revenue to $21.8 billion. Analysts surveyed by FactSet were expecting earnings of $4.68 on revenue of $21.64 billion.
CEO Ginni Rometty credited “accelerated cloud performance” for the quarter as the company returned to overall revenue growth. “Looking ahead, this positions us for sustained revenue growth in 2020.”
The company last year completed its acquisition of Red Hat, which helped free cash flow. IBM reported a 24% increase in quarterly Red Hat revenue while total cloud revenue of $6.8 billion was a 21% increase from a year earlier.
“In 2019, we continued to invest in the higher-value growth areas of the industry and took bold actions -- including several divestitures and a major acquisition -- to position our business, which are reflected in our strong gross-margin performance," Chief Financial Officer James Kavanaugh said in a statement.
Last week was a bit rough for IBM after the company was the subject of two negative notes ahead of its quarterly earnings.
In one, Morgan Stanley wrote that internal surveys “point to further deceleration in 2020 IT spend with a continued downward bias to budget revisions.” As a result, the firm said, margins “are a new risk in 2020.”
Morgan Stanley cut its one-year price target to $155 a share from $170.
IBM shares have gained 10% over the past 12 months. At last check after hours the stock was up 3.9%. It closed the regular Tuesday session up 0.6% at $139.17.