IBM bets big on Kyndryl to boost revenue stream in 2022

IBM, which spinned-off its managed infrastructure business as a new entity called Kyndryl last year, expects that the new commercial relationship with Kyndryl will contribute an additional 3 points of growth in 2022.

In an earnings call for its Q4 2021 results late on Monday, IBM Chairman and CEO Arvind Krishna said that as the company looks to 2022, "we expect mid-single-digit revenue growth before Kyndryl and currency and $10 billion to $10.5 billion of free cash flow for the year. Both of these are consistent with our medium-term model".

The company posted solid revenue performance in Q4 2021, up nearly 9 per cent, and this includes the incremental revenue from the new commercial relationship with Kyndryl.

"This quarter, our revenue growth includes about 3.5 points from the new relationship (Kyndryl). Excluding this, IBM's revenue was up 5 per cent," said CFO James Kavanaugh.

IBM reported a revenue of $16.7 billion, up 8.6 per cent (including about 3.5 points from incremental external sales to Kyndryl).

While software revenue was up 8 per cent, consulting revenue was up 13 per cent.

The Hybrid cloud revenue was $6.2 billion for the fourth quarter and $20.2 billion for the full year.

"We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," said Krishna.

"Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single digit revenue growth and strong free cash flow in 2022."

IBM, one of the oldest tech companies, entered a new digital era in the pandemic on November 3 last year with spinoff of its managed infrastructure business as a new entity called Kyndryl, for which India is a big growth market.

IBM now has more than 3,800 Hybrid Cloud platform clients, which is up 1,000 clients from this time last year.

"As we move towards that, we had more than 50 per cent revenue growth this year in partnerships with AWS, Azure and Salesforce. This adds to the strong strategic partnerships we have with others such as SAP, Oracle and Adobe," said Krishna.