Insider Brief
- IBM has booked $1 billion in revenue from quantum technology, with expectations for substantial future growth as the company focuses on transformative technologies like quantum and AI.
- IBM’s strategic investments in quantum and AI are central to its growth, highlighted by the launch of advanced quantum computers and a new collaboration to establish the National Quantum Algorithm Center in Chicago.
- The company reported a 1% increase in Q4 2024 revenue, driven by a 10% rise in software revenue, while consulting and infrastructure revenues saw declines.
IBM officials have told CNBC that the company has booked a cumulative $1 billion over the years — and they expect quantum to bring in a lot more as the company turns toward transformative technologies to deliver real-world revenue in the future.
Although the report did not specify when IBM’s quantum revenues began, it highlighted the company’s growing reliance on emerging technologies, particularly quantum and artificial intelligence (AI), to drive new and expanding revenue streams. This strategic focus on quantum and AI was especially evident in IBM’s latest quarterly and annual updates.
The company, which released its fourth quarter 2024 earnings report last week to Wall Street approval, indicated AI is critical to IBM’s growth. Generative AI has earned IBM a cumulative $5 billion, the company’s Arvind Krishna, IBM chairman, president and chief executive officer, in a statement on the Q4 earnings.
“We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red Hat. Clients globally continue to turn to IBM to transform with AI. Our generative AI book of business now stands at more than $5 billion inception-to-date, up nearly $2 billion quarter over quarter,” said Krishna. “Three years ago, we laid out a vision for a faster-growing, more-profitable IBM. I’m proud of the work the IBM team has done to meet or exceed our commitments. With our focused strategy, enhanced portfolio, and culture of innovation, we’re well-positioned for 2025 and beyond and expect revenue growth of at least five percent and free cash flow of about $13.5 billion this year.”
Emerging Technologies, Increasing Investments
According to the earnings report, IBM is increasing their investments in those deep techs. The report shows that segment profit was $1.06 billion compared with $1.3 billion in the last quarter, which was mainly attributed to higher investments in areas such as AI, hybrid cloud and quantum.
IBM also called out quantum in its investors’ newsletter for Q4 2024 with a series of highlights, including the launch of its most advanced quantum computers, driving progress toward quantum advantage. Additionally, the company announced a collaboration to establish the National Quantum Algorithm Center at the Illinois Quantum and Microelectronics Park in Chicago, expanding its quantum footprint.
The moves in quantum and AI underscore IBM’s strategic focus on emerging technologies, according to Krishna.
“With more than 75 quantum systems deployed worldwide, our focus on emerging innovation is clear,” Krishna said during the earnings call. “This quarter we announced a collaboration with the State of Illinois to establish the National Quantum Algorithm Center in Chicago. M&A remains a key enabler of our strategy. The acquisition of Neural Magic strengthens our AI solutions with advanced model optimization.”
Fourth-Quarter and Full-Year Financial Highlights
In other fourth quarter news, IBM reported revenue of $17.6 billion, a 1% increase year-over-year, or 2% when adjusted for constant currency. Software revenue grew by 10%, while consulting and infrastructure revenues saw declines of 2% and 8%, respectively. Gross profit margin reached 59.5% (GAAP), up 40 basis points, and 60.6% on a non-GAAP basis, up 50 basis points.
For the full year, IBM achieved total revenue of $62.8 billion, reflecting a 1% increase, or 3% at constant currency. Software revenue was up 8%, while consulting and infrastructure revenue declined by 1% and 4%, respectively. Gross profit margin for the year was 56.7% (GAAP), up 120 basis points, and 57.8% on a non-GAAP basis, up 130 basis points.
