IBM Common Stock (NYSE:IBM) stock rose 6.89% (As on Apr 20, 11:20:10 AM UTC-4, Source: Google Finance) after the company posted better than expected results for the first quarter of FY 22. Net income from continuing operations jumped 64% from a year earlier to $662 million. Overall net income declined 23%. In the first quarter, IBM’s software segment generated $5.77 billion in revenue, which was up 12% and above the $5.63 billion consensus among analysts surveyed by StreetAccount. Consulting revenue rose 13% to $4.83 billion, higher than the $4.6 billion StreetAccount consensus. Revenue from infrastructure fell 2% to $3.22 billion, as clients prepare for IBM’s next-generation mainframe computer later this year. Also during the quarter, IBM said Francisco Partners agreed to buy its Watson health-care data and analytics assets in a deal reportedly worth over $1 billion. IBM issued updated historical figures for its high-margin software segment to better reflect its financials without those businesses. In early March, IBM said it stopped doing business in Russia after the country invaded Ukraine.

Moreover, the gross margin of IBM’s consulting business contracted to 24.3% from 27.8% in the year-ago quarter, and the companywide gross margin reached 51.7%, compared with 53.3% one year ago. Acquisitions cut into margins in addition to higher costs to hire employees, Kavanaugh said on the analyst call. IBM announced the acquisitions of environment data analytics software maker Envizi and telecommunications consulting firm Sentaca in the first quarter. The company said higher contract prices will bolster the pre-tax margin of its consulting business in 2022, which should be up 2 percentage points.

IBM in the first quarter of FY 22 has reported the adjusted earnings per share of $1.40, beating the analysts’ estimates for the adjusted earnings per share of $1.38, according to Refinitiv. The company had reported the adjusted revenue growth of 7.7 percent to $14.2 billion in the first quarter of FY 22, beating the analysts’ estimates for revenue of $13.85 billion. Sales to Kyndryl added 5 percentage points to revenue growth in the quarter. But Kyndryl won’t be delivering growth after October as per the company.

IBM raised its full-year guidance, calling for revenue growth in constant currency in the high end of its mid-single-digit range, with an additional 3.5 percentage points of growth from Kyndryl. In January the executives told analysts to expect mid-single-digit growth, not including impact from Kyndryl or currency.