IBM Eyes Hybrid Cloud and AI for Future Growth
IBM (NYSE:IBM) Chief Financial Officer Jim Kavanaugh said hybrid cloud and generative artificial intelligence both provide long-term growth opportunities for Big Blue.
"We are fundamentally a different company than where we were four or five years ago," Kavanaugh said during the Goldman Sachs Communacopia and Technology conference on Monday. "Our focus is now on hybrid cloud and AI. We built a very attractive multiplier effect on those platforms."
"I think the market has been moving to what we are focused on," he said.
Mergers and acquisitions, as well as key divestitures, have played a formative role in IBM's transformation.
"Our business was stagnating on free cash flow," he said. "Now it has doubled in the past three years."
One of the most strategic of those acquisitions was Red Hat, which propelled IBM into the hybrid cloud sector. He said they typically set aside $4B to $5 per year in M&A. This year they will probably hit $9B. This is due to the acquisition of HashiCorp for $6.4B, which adds a suite of hybrid and multi-cloud lifecycle management products to aid clients with today's AI-driven application growth.
Kavanaugh said the HashiCorp acquisition should close before the end of the year.
The focus on hybrid cloud and GenAI has helped IBM reinvigorate its software and consulting businesses as well. IBM's mainframe business has also grown as 80% of its clients are growing workloads, Kavanaugh added.
He said IBM is close to announcing another strategic acquisition, and will continue to scour the market in 2025 for more possibilities.
