Technology stock

IBM, MSFT and Intel forecasts rise despite falling tech stock prices

Tech companies began reporting quarterly results this week, signaling continued IT spending.

Despite the steep decline in technology stock prices in January, IBM, Microsoft and Intel are reporting continued growth in IT spending. All three companies reported that revenue and earnings for their most recent fiscal quarters exceeded expectations. More importantly, they issued an encouraging outlook for 2022.

IBM kicked off the technology earnings reporting season on Monday by estimating mid-single-digit growth this year, up from 3.9% in 2021. Microsoft on Tuesday announced strong prospects across all of its segments, including its Intelligent Cloud group, driven by Azure. Projected Microsoft Intelligent Cloud revenue of $18.75 billion to $19 billion for the company’s third quarter of fiscal 2022 will exceed consensus estimates of $18.15 billion. And Intel said Wednesday it expects revenue of $18.3 billion for this quarter, above the average forecast of $17.6 billion.

The guidance builds on better-than-expected results released this week by all three companies. In the quarter just ended last month, they reported revenue and earnings that beat consensus analyst expectations. During the fourth calendar quarter:

  • IBM’s revenue of $16.7 billion for the fourth quarter of its fiscal year 2022 beat estimates of $15.96 billion, up 6.5% year-over-year.
  • Microsoft’s revenue of $51.73 billion beat expectations of $50.88 billion and was up 20% year over year.
  • Intel’s revenue of $19.5 billion beat the average forecast of $18.31 billion, up 4% from the same period last year.

Economic headwinds

The omicron variant of COVID-19, interest rate hikes and rising inflation have fueled fears that customers are cutting back on IT spending. But labor shortages and signs of a growing economy are fueling more investment in technology, suppliers and partners say.

Microsoft’s Satya Nadella

“Overall, what we’re seeing is a pretty strong demand signal,” Microsoft Chairman and CEO Satya Nadella said during Tuesday’s earnings webcast. “Quite frankly, at the start of the pandemic, we saw demand increase due to the strains the pandemic placed on businesses and increased consumer activity. And then coming out of the pandemic, we see a lot of strain on the economy. And the only resources that can help boost productivity while reducing costs are digital technology. »

These constraints, in addition to labor shortages, include a changing business climate and ongoing supply chain disruptions. IBM Chairman and CEO Arvind Krishna shared Nadella’s view on his earnings call that customers will continue to invest in IT.

IBM's Arvind Krishna

IBM’s Arvind Krishna

“The trend we are seeing is clear across all sectors,” Krishna said. “Customers see technology as a major source of competitive advantage. This reality of technology going far beyond cost will persist and is why customers are eager to leverage hybrid cloud and artificial intelligence to drive the business forward. »

Partners are also seeing strong demand

Partners are seeing the same trends reported by vendors. Tony Guidi, senior vice president of strategic partnerships at Core BTS, said his customers are accelerating their cloud migrations. Guidi said support for remote workers will remain an ongoing requirement.

“We haven’t seen any customers start to pick this up, especially customers [that] traditionally all worked in-house from offices across the country,” Guidi said. “They realized they could do business and do business efficiently, remotely. We are even seeing some of our clients begin to close commercial office space. When leases start to expire, they simply don’t need the same amount of space.

Eric Boyd, founder and CEO of resonsiveX, said customers haven’t slowed down their technology investments.

“The pandemic has added a whole new level of pressure on customers,” Boyd said. “It has accelerated the integration of more of these cloud solutions and the optimization of their processes.”

The big swings in tech stock prices this month, at least for now, haven’t dampened the outlook.

“I suspect that this volatility we’ve seen recently won’t have much of an impact,” IBM’s Krishna said. “Now, if it became an overall bear market correction, it would be different, but I don’t think we’re close to that.”