IBM shares climbed 12.3% in January 2024, according to S&P Global Market Intelligence. A strong earnings report lifted Big Blue, signaling that its investment on cloud computing and AI is paying off.
IBM's earnings announcement didn't include shocking statistics. Revenue rose 4.1% to $17.4 billion, above the consensus analyst expectation by $80 million. Adjusted EPS grew 7.5% to $3.87 per diluted share, above analyst expectations by 2%. Strong outcomes, but no game-changer yet.
News that moved the market was elsewhere in the article. According to recent business patterns, IBM's management forecasts mid-single-digit sales growth next year, double Wall Street's forecast. In 2024, free cash flows should reach $12 billion, up from $11.2 billion last year and $1.5 billion over the company's three-month-ago projection.
However, there is more. Unfilled AI service orders were IBM's most important and motivating earnings report section.
In the third quarter, IBM's order bookings for generative AI and Watsonx AI services were "the low hundreds of millions," CEO Arvind Krishna said in an earnings call. Late December, that metric doubled. Most of Big Blue's new revenue is consulting, helping companies install, integrate, and use its game-changing AI technologies.
In other words, IBM revealed unprecedented demand for its AI solutions. This research reinforced IBM's status as a major AI player. On the next day, IBM's stock rose 9.5% to levels not seen since 2013.
It's not too late to attach your AI wagon to this large blue turtle. I hate to say "I told you so," but I've been praising IBM's undervalued AI division for months. Big Blue prioritizes enterprise-class clients above consumers, adding numerous levels of testing, approvals, and due diligence reports between "hey, that's a cool AI tool" and "here's your multiyear contract." That delay hides IBM's growth from most investors.
IBM's AI progress is slower than many of its consumer-oriented competitors, but "slow and steady wins the race." The turtle is huge and blue, and the stock remains inexpensive despite a decade of adverse pricing. IBM shares may be bought at 2.7 times trailing sales and 13.6 times free cash flows for 3.7% dividends. Consider doing it before an AI-powered growth surge takes off.
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