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Is IBM’s Revenue Growth Sustainable?

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Jan. 25 2018, Updated 7:15 p.m. ET

IBM’s revenues finally grew in 4Q17

IBM’s (IBM) revenues finally rose in 4Q17 after 22 consecutive quarters of negative growth. The 106-year-old company’s revenues rose ~4.0% year-over-year to $22.5 billion.

This revenue growth occurred on the back of robust sales in the Cloud Computing business and systems hardware. Despite this revenue growth, IBM stock fell 4.0% on January 19. The company’s stock price had risen more than 15.0% since the company announced its 3Q17 report.

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IBM’s cash flow could decline in 2018

IBM (IBM) noted that it expects a minor decline in its free cash flow in 2018 due to higher capital expenditure on key areas to drive growth. The company aims to generate more than 50% of its revenues from strategic imperatives. These revenues would come from businesses like Cloud Computing, which the company believes could be the source of the next wave of growth.

IBM finally saw positive growth in EPS (earnings per share) during fiscal 2017 compared to fiscal 2016. The previous three fiscal years saw declining EPS. However, IBM expects flat EPS growth in fiscal 2018 as the company prepares to spend more during the year.

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