IBM shares dropped approximately 4% on Thursday despite the fact that the iconic tech company posted upbeat quarterly figures and plans to lay off 3,900 workers, which equals to 1.5% of its workforce.

Fourth-Quarter Highlights

• Company earned $3.60 per share, which matched market consensus.

• Revenue of $16.69 billion was unchanged and beat Refinitiv estimates of $16.4 billion.

• Red Hat revenue, the cloud computing group that IBM acquired for $34 billion in 2019, jumped 10%, while software revenues rose 2.8% to $7.3 billion. Consulting revenues increased by 0.5% to $4.8 billion.

„Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today’s business environment,” said Arvind Krishna, IBM chairman and chief executive officer.

„Looking ahead to 2023, we expect full-year revenue growth consistent with our mid-single digit model.”

• Big Blue joins a slew of tech companies which are cutting costs by slashing its workforce amid rising recession fears.

• The 3900 layoffs are related to the spinoff of its Kyndryl business and a part of AI unit Watson Health. The move will cost the company about $300 million this quarter, a spokesperson confirmed.

• IBM expects free cash flow in the region of $10.5 billion in the current fiscal year, which is 12.9% higher compared to last year, with revenues rising by a „mid-single digit” percentage from 2022 levels.

• Analysts, on average, expected $9.18 billion of free cash flow and annual revenue growth of 1.2%, according to Bloomberg.

On a consolidated basis, for the full year, the company generated net cash from operating activities of $10.4 billion, down $2.4 billion. Net cash from operating activities was $11.2 billion, up $2.3 billion.

IBM’s free cash flow was $9.3 billion, up $2.8 billion. IBM returned $5.9 billion to shareholders in dividends.

IBM ended the fourth quarter with $8.8 billion of cash on hand (which includes marketable securities), up $1.3 billion from year-end 2021. Debt, including IBM Financing debt of $12.9 billion, totaled $50.9 billion, down $0.8 billion since the end of 2021.