IBM shares jumped as much as 7% in extended trading but then shed most of their gains on Monday after the software and services company said its revenue rose 6% in the fourth quarter, exceeding expectations.

Here’s how the company did it:

• Earnings: $3.35 per share, adjusted, versus $3.30 per share as expected by analysts, according to Refinitiv.
• Income: $16.70 billion, versus $15.96 billion, versus as expected by analysts, according to Refinitiv.

During the period, IBM spun off its managed infrastructure services business to Kyndryl. For IBM’s continuing operations, revenue increased 6% from a year earlier, the company said declaration. Part of the growth comes from sales to Kyndryl.

IBM executives recently told investors to seek single-digit revenue growth. In the prior quarter, IBM’s revenue from continuing operations increased 2%. The company posted its fastest revenue growth since the third quarter of 2011.

Net profit in the fourth quarter jumped 72% from a year earlier to $2.33 billion, while gross margin narrowed to 56.9% from 58.9%.

Arvind Krishna, CEO of IBM, reiterated the single-digit growth target during a conference call with analysts and said to expect between $10 billion and $10.5 billion in free cash flow for 2022 .

It will take a few quarters for IBM’s earnings to reflect higher labor costs, said Jim Kavanaugh, the company’s chief financial officer.

The tech industry as a whole faces a shortage of people with the right skills, Krishna said.

“I will use the word demographics to refer to the skills shortage that is endemic in technology today,” he said. And it’s sort of a game. By the way, I don’t believe the skills shortage is due to COVID. I believe COVID may have exacerbated or created a pull in those demographics, but I think those are going to last us through the decade.”

IBM has streamlined its reporting segments for the fourth quarter in conjunction with the Kyndryl separation. Its software business, formerly known as Cloud and Cognitive Software, generated $7.27 billion in revenue, up 8% from a year earlier and above consensus of $6.72 billion. dollars among analysts surveyed by StreetAccount.

Revenue from the consulting unit, previously named Global Business Services, rose 13% to $4.75 billion, more than the StreetAccount consensus of $4.20 billion. IBM’s infrastructure business, which includes hardware, fell 0.3% to $4.41 billion and slightly below consensus of $4.43 billion. A new mainframe cycle will begin late in the first half of the year, Kavanaugh said.

As of Monday’s close, IBM shares are down 4% year-to-date, while the S&P 500 is down 8%.

“Mergers and acquisitions must have an economic benefit for our company and our shareholders,” Krishna said. “As valuations fall, it’s clear that some targets may become more accessible where they weren’t before. And like I said before, look, we have a little over $20 billion in flexibility over the next three years. This is our total flexibility. As the prices go down, there’s definitely more stuff at your fingertips.

In addition to completing the Kyndryl transaction, IBM announced during the period acquisitions of Australian cloud consulting firm SXiQ and one counseling unit which manages Adobe implementations. He also announced a vertical semiconductor transistor architecture alongside Samsung.

Kyndryl generated $4.6 billion in revenue in the third quarter, with more than 4,000 customers and about 90,000 employees, according to an a regulatory filing.