IBM reaps rewards from Red Hat acquisition

The $34 billion IBM gave Red Hat has already paid off
(photo: Red Hat)

IBM’s first-quarter revenue was $14.3 billion, up 0.4 percent from the same period last fiscal year, and profit rose 26.5 percent to $927 million, the IT financial report said the corporation.

IBM’s software division posted revenue of $5.92 billion, up 2.6% from Q1 2022 and beating analysts’ expectations of $5.83 billion.

In the hybrid cloud solutions segment, IBM reported growth of 2%, including revenue from acquired Red Hat operations, which increased by 8%, while data and AI solutions grew by 1%. The transaction processing software generated a 3% increase in revenue compared to last year.

IBM CEO Arvind Krishna and CFO Jim Kavanaugh pointed to Red Hat as a major source of strong growth in the software sector. This is facilitated by the demand for the OpenShift platform, which has reached $1 billion in annual revenue, and the Ansible automation platform.

A few years after IBM completed its $34 billion acquisition of Red Hat, the investment has already paid off. “We’ve quadrupled Red Hat’s revenue in about three and a half years,” said Jim Cavanaugh.

IBM’s consulting services brought in revenue of $4.096 billion (a 2.8% increase) to the company, although analysts had forecast slightly more at $5.01 billion.

The infrastructure division posted a 3.7% decline to $3.1 billion, despite IBM Z System growth of 7%. Infrastructure maintenance revenue was down 9%.

In the financial segment, the company received revenues of $0.2 billion, up 27.3% year-on-year. As for the forecast for 2023, IBM plans to increase its revenue this year by 3-5% (excluding currency fluctuations).