IBM Common Stock (NYSE:IBM) stock surges 12.84% (As on January 25, 11:17:44 AM UTC-4, Source: Google Finance) after the company announced fourth-quarter results that exceeded Wall Street’s expectations and ended 2023 with more free cash flow than it had projected. Net income, at $3.29 billion, or $3.55 per share, increased from $2.71 billion, or $2.96 per share, in the year-ago quarter. The company confronted “a very challenging, uncertain, volatile macroeconomic environment,”. Free cash flow for the year totaled $11.2 billion, more than the $10.5 billion management had called for. The company’s fourth-quarter gross margin, at 59.1%, was the widest since 1999. Real estate reductions resulted in lower quarterly capital expenditures. During the quarter, IBM introduced a $500 million venture fund targeting enterprise artificial intelligence startups, and it announced plans to pay 2.13 billion euros, or $2.32 billion at the current exchange rate, for StreamSets and webMethods, two businesses majority-owned by Software AG.

Moreover, IBM said software revenue came to $7.51 billion, up 3% but less than the $7.67 billion consensus among analysts surveyed by StreetAccount. Consulting revenue, at $5.05 billion, grew about 6% and ended up less than the $5.12 StreetAccount consensus. Revenue from infrastructure, such as mainframe computers, totaled $4.60 billion, up around 3%. The StreetAccount consensus was $4.28 billion. The distributed infrastructure category in particular, containing servers with IBM’s Power chips, accelerated to 8% growth, compared to a decline of 4% in the third quarter.

IBM in the fourth quarter of FY 23 has reported the adjusted earnings per share of $3.87, beating the analysts’ estimates for the adjusted earnings per share of $3.78, according to analysts surveyed by LSEG, formerly known as Refinitiv. The company had reported the adjusted revenue growth of 4 percent to $17.38 billion in the fourth quarter of FY 23, beating the analysts’ estimates for revenue of $17.30 billion. IBM ended the fourth quarter with $13.5 billion of cash and marketable securities, up $4.6 billion from year-end 2022. Debt, including IBM Financing debt of $11.9 billion, totaled $56.5 billion, up $5.6 billion since the end of 2022.

Additionally, in the fourth quarter, the company generated net cash from operating activities of $4.5 billion, up $0.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $6.3 billion. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.

IBM said it sees $12 billion in 2024 free cash flow and revenue growth in the mid-single digits at constant currency.