While Red Hat growth is cooling, IBM executives are still bullish on hybrid cloud and artificial intelligence.
Executives said Red Hat, the Raleigh-based open source software company IBM acquired in 2019, came in a few points below expectations in the third quarter, its revenue growing by 8 percent. But CFO Jim Kavanaugh said signings growth has the team “very confident in the long-term posture of Red Hat growing double digits.”
“We’ve just got to get through and monitor what’s happening to us on the services side,” Kavanaugh said.
Here’s a look at Red Hat growth by quarter:
- Q3 2023: 8%
- Q2 2023: 11%
- Q1 2023: 11%
- Q4 2022: 15%
- Q3 2022: 18%
What is growing for IBM is AI – and not necessarily at the expense of corporate workforces. IBM CEO Arvind Krishna said when it comes to AI applications in coding, customers aren't looking “to get rid of any developers.”
Instead, he said, they’re saying, “This allows us to take care of the tech debt that we’ve accumulated and makes every developer more productive.”
“Most enterprises are very quick to realize, if you are more productive, that means you have a competitive advantage to your peers,” Krishna said. “And if they have a competitive advantage to their peers, they’ll take share without spending more on labor.”
But Krishna did say that in terms of customer service, “more chats answered by AI, that means you can have much more volume with a smaller number of people.”
With higher interest rates, a tight talent pool and geopolitical uncertainty, AI offers companies a way to “get through that without having to decrease their ambitions for next year,” Krishna said.
Overall, it was an earnings beat for IBM in Q3, at nearly $14.8 billion in revenue for the quarter, 4.6 percent year-over-year growth. Software was up 8 percent, at nearly $6.3 billion in revenue.
IBM, one of Research Triangle Park's largest employers, was trading up nearly 4.9 percent Thursday, at $143.76.