IBM posted strong results for Q1 2022 which were driven by the company’s hybrid cloud platform strategy. However, CEO Arvind Krishna warned the company expects to take a “measurable” hit to revenue this year due to the suspension of its business in Russia.
The company decided to halt operations in the country last month in response to Russia’s decision to wage war in Ukraine. Speaking on an earnings call, CFO Jim Kavanaugh said IBM’s business is “not large, but it’s concentrated in high-end infrastructure and software.” While operations in the country contributed $300 million in revenue and $200 million in profit and cash to IBM’s balance sheet last year, Kavanaugh said it expects “no contribution from Russia” in 2022. This will leave the company “closer to the low end of our free cash flow range.”
Revenue of $14.2 billion in Q1 2022 was up 8% year on year. By segment, Software revenue rose 12.3% to $5.8 billion, Consulting sales increased 13.3% to $4.8 billion and Infrastructure revenue fell 2.3% to $3.2 billion. Net income fell from $955 million in Q1 2021 to $733 million in the recent quarter.
Hybrid cloud revenue accounted for more than a third of overall revenue, growing 14% year on year to $5 billion. During an earnings call, Krishna said IBM added 200 hybrid cloud platform clients, raising its total to more than 4,000. He pointed to Red Hat as the core of its offering in this space. Though the company didn’t provide break out figures, it noted Red Hat revenue rose 18% year on year in Q1.
Looking ahead, Krishna said the company’s hybrid cloud platform strategy offers it two avenues to growth: first, from the incremental increase in clients and second through the expansion of its “software, consulting and infrastructure footprint at these clients.”
Kavanaugh added this approach is already paying off, stating “revenue from our full-stack cloud capabilities – from infrastructure up through consulting – represents $20.8 billion of revenue over the last 12 months, or 36 percent of our total.”