Red Hat helped lift IBM from a multiyear stagnation into growth again. This week, Big Blue reported fourth-quarter results that beat analysts' estimates, behind the robust growth of its hybrid cloud business.

In July 2019, IBM closed its $34 billion acquisition of Red Hat, which appears to be money well spent. Red Hat was the perfect fit that helped the technology giant complete its multiyear "creative destruction," moving out from mature low-margin segments to emerging high-margin segments of the IT industry and turning its fortunes around.

Red Hat brought IBM the world's most extensive open source technology portfolio, an innovative hybrid cloud platform, and a vast open-source developer community.

"We increased revenue in the fourth quarter with hybrid cloud adoption driving growth in software and consulting," said IBM CEO Arvind Krishna. "Our fourth-quarter results give us confidence in our ability to deliver our objectives of sustained mid-single-digit revenue growth and strong free cash flow in 2022."

IBM has invested heavily in the hybrid cloud business by boosting research and development and buying up companies in this space.

"In 2021, we continued to invest for the future by increasing R&D spending, expanding our ecosystem and acquiring 15 companies to strengthen our hybrid cloud and AI capabilities," said IBM's chief financial officer James Kavanaugh. "With the separation of Kyndryl, we now have taken the next step in the evolution of our strategy, creating value through focus and strengthening our financial profile."

Anthony Denier, CEO of trading platform Webull, noted IBM's fourth-quarter results.

"IBM had a good quarter," he said. "It reported $3.35 adjusted earnings per share, which beat analysts' estimates of $3.30. Revenues came in at $16.7 billion vs. estimates of $15.9 billion. That 6% sales growth is the best growth IBM has posted in a decade. It was a little better in the business' faster-growing segments. Taking out currency fluctuations, software grew 10%, consulting was up 16%, hybrid-cloud climbed 18% and Red Hat jumped 21%. Free cash flow was $6.5 billion."

Denier expects mid-single-digit growth in 2022.

Investors reacted to IBM's fourth-quarter results, sending its shares higher in the opening of a down day.

"IBM's results for Q3 2021 came in strong, and it is the only stock in the tech sector showing an increase in price today," said Julius de Kempenaer, senior technical analyst at "IBM's price chart started declining at the start of 2013 from a peak price at $215 and the big downtrend [lower highs and lower lows] is still in play."

De Kempenaer thinks the stock is still under selling pressure.

"Last year the stock topped at 152 and 146, and after a dip to 115 IBM set another peak lower at 142 at the start of this year after which yet another decline set in," he said. "Today's rally, following yesterday's intraday turnaround, is not changing that picture yet. And with the general weakness for the market and the tech sector especially, it is unlikely that it will in the near future."

Nonetheless, de Kempenaer is encouraged by Tuesday's performance in IBM's stock in a down day for the tech industry.

"When [the] price can hold at current levels or even push a bit higher while the sector remains in trouble, IBM is one of the more interesting plays, even despite the downtrend in price," he said.