IBM forecasts upbeat 2022 revenue on cloud strength; flags Russia hit


FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez

(Reuters) -IBM expects to hit the top end of its revenue growth forecast for 2022, the company said on Tuesday, even as it flagged a $300 million knock to revenue from the suspension of its business in Russia.

Servers from IBM, Dell Technologies Inc and Hewlett Packard Enterprise Co dominate the market in Russia. IBM suspended its operations in March following Moscow's invasion of Ukraine.

The impact from Russia equates to less than "half a percent" of total revenue last year, Chief Financial Officer James Kavanaugh said, but added IBM expects a $200 million hit to 2022 profit.

Total revenue rose 8% to $14.20 billion in the first quarter, beating estimates of $13.85 billion according to Refinitiv data. Adjusted profit of $1.40 per share also topped expectations of $1.38.

"The fact that IT giant IBM came in with good numbers despite the Ukraine crisis and Netflix's negative results sets an encouraging tone for enterprise software and tech companies reporting next week," said Dan Morgan, senior portfolio manager at Synovus Trust.

Shares of the company were up 3% in extended trading.

Having shed its large and laggard IT-managed infrastructure business last year, IBM has bet on high-growth software and consulting businesses with a focus on the so-called "hybrid cloud".

Cloud revenue jumped 14% to $5 billion during the reported quarter.

The century-old company said it expects to hit the higher end of its mid-single-digit revenue growth forecast for this year, with the growth expected to come from the consulting business.

Analysts on average expect annual revenue of $60.69 billion, implying a year-on-year rise of 5.8%.

Kavanaugh told Reuters that clients pushing to digitize operations is fueling strong demand for the consulting business, including in Europe despite the Ukraine crisis.

He, however, flagged wage inflation pressures in the business.

(Reporting by Chavi Mehta in Bengaluru; Editing by Krishna Chandra Eluri and Sriraj Kalluvila)

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