IBM Earnings Edge Estimates. The AI Bet Is Starting to Pay Off, CEO Says.

IBM’s third-quarter earnings edged Wall Street estimates, and its CEO says the company’s push into artificial intelligence is starting to pay off.

For the quarter, the enterprise technology giant posted revenue of $14.75 billion, up 4.6% from a year ago, and slightly ahead of the Wall Street consensus forecast at $14.73 billion. IBM reported adjusted earnings of $2.20 a share, 8 cents ahead of the Street consensus at $2.12, as measured by FactSet. Under generally accepted accounting principles, the company earned $1.86 a share.

“We took our eye off the ball a little bit,” he said. “There’s no fundamental issue, but it was a little bit of an execution miss.” IBM generated $1.7 billion in free cash flow in the third quarter, up nearly $1 billion from the year-ago period. IBM continues to forecast full-year free cash flow of about $10.5 billion, up more than $1 billion from the previous year.

Non-GAAP operating margin was 15.6%, falling a little short of consensus at 16.6%, but nonetheless 1.7 percentage points higher than the year earlier period. Non-GAAP gross margin was 55.5%, up 1.6 percentage points from the year-earlier quarter.

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