As trading delays ease, IBM raises its annual software revenue forecast.

Anhata Rooprai

Reuters, October 21 - IBM IBM.N Chief Financial Officer James Kavanaugh said on Wednesday that the previously delayed software deals that unsettled investors last quarter are starting to close. At the same time, the company raised its outlook for that segment and released third-quarter earnings that topped expectations.

In an interview with Reuters, Kavanaugh stated that IBM now expects annual software revenue growth to reach about 7% to 8%, higher than the previous projection of 6% to 8%.

Here are more details:

• According to data compiled by London Stock Exchange Group (LSEG), third-quarter revenue grew 4.7% to $17.1 billion, exceeding analysts' average estimate of $16.82 billion

• Adjusted earnings per share came in at $2.95, higher than the market expectation of $2.86

• Chief Executive Officer Arvind Krishna said in July that IBM had “underperformed” in adjusting the "link" business to the trend of customer spending shifting from software to data center infrastructure, leading to the company's largest single-day stock price drop in over a century

• Third-quarter software revenue rose 8.3% to $7.8 billion, surpassing the $7.62 billion estimate

• Within this segment, hybrid cloud revenue grew 11% and transaction processing software revenue rose 9%, rebounding from an unexpected decline in the previous quarter

• Kavanaugh stated that about 25% of transaction processing revenue came from deals deferred in the second quarter, while “the other 75% was net new business”

• Infrastructure segment revenue increased 4.2% to $3.71 billion, with distributed infrastructure—including servers and storage systems—growing 31%, helping offset weakness in the Z mainframe business

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