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IBM’s strong performance in the second quarter of 2024 is largely attributed to the company’s focus on leveraging artificial intelligence to drive growth across key segments despite economic challenges. The company reported a 4% year-over-year increase in revenue, reaching $15.8 billion, with CEO Arvind Krishna highlighting AI and hybrid cloud as significant growth drivers. IBM’s AI initiatives, anchored by watsonx, were integrated into the company’s software, infrastructure, and consulting services.

The growth in IBM’s software segment, up 8% year-over-year, was fueled by the integration of AI capabilities, particularly through watsonx and AI-powered tools like watsonx Orchestrate. Red Hat, a cornerstone of IBM’s hybrid cloud strategy, also significantly contributed to this growth by integrating AI capabilities into products such as OpenShift AI and RHEL.AI. The open-sourcing of IBM’s Granite AI models on platforms like Hugging Face and GitHub has allowed for the customization of models with enterprise-specific data, enhancing business needs while retaining control over proprietary enhancements.

IBM’s consulting segment grew by 2% year-over-year, with AI-related projects playing a pivotal role in generating over $2 billion in generative AI-related business. Despite macroeconomic challenges impacting discretionary spending, IBM secured significant consulting wins with companies like Virgin Money, Crédit Mutuel, and Panasonic, contributing to a 5% growth in the consulting backlog. CEO Krishna emphasized the importance of generative AI in driving revenue growth, cost-cutting, and transforming business operations.

In terms of infrastructure, IBM saw a 3% year-over-year revenue increase driven by the performance of IBM Z mainframe solutions with real-time AI inferencing capabilities. IBM’s efforts towards advancing quantum computing during the quarter focused on expanding its quantum capabilities through the Qiskit open-source quantum computing software. Looking ahead, IBM raised expectations for free cash flow to over $12 billion for the year, with continued growth expected in software and infrastructure driven by AI and hybrid cloud innovations.

IBM’s partnerships with industry leaders like Adobe, AWS, Microsoft, Meta, Salesforce, and SAP further enhance its AI capabilities and position the company to capitalize on the expanding AI market. The company’s strategic focus on AI integration has driven growth across its software, infrastructure, and consulting segments, establishing IBM as a leader in helping enterprises safely adopt AI. Despite economic challenges, IBM’s innovative approach and focus on AI and quantum computing ensure its sustained growth and long-term success in the digital transformation landscape.

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