That’s about 2 points of growth of slightly above the mid-single digit model of software. So 2 points based on credibility of our sustained growth in the high-value recurring revenue. Number two, you talked about acquisitions. We are going to continue to invest and fuel investment into our software portfolio to improve the innovation, the synergistic value, the strategic fit, the hybrid cloud and AI. You saw we closed very excited off to a great start with Apptio, and we announced the acquisition of Web Methods and Stream Sets. Acquisitions will probably give us a little bit less than 2 points of that growth in 2024. So 2 points from high-value recurring revenue, a little bit less than 2 points of acquisition and then Red Hat, to your point.
We actually delivered about what we said in fourth quarter. We said high single digit. We still got impacted by consumption-based services. By the way, we’ll start wrapping on that later in 2024. But we’re extremely excited about the acceleration of demand in our single-year bookings in our subscription book of business, 14% growth in third quarter, 17% growth in fourth quarter. Red Hat will give us about 2.5 points of growth year-over-year. And then the remaining 0.5 point is our continued growth of our transaction processing, and that’s about 0.5 point. You add those up, you’re over 6% growth, and I think we feel pretty good. But let me turn it over to Arvind.
Arvind Krishna: Thanks, Jim. And Amit, the second part of that is all of the innovation that we are delivering. When we play it up against the demands in the marketplace, our AI platform is going to be a part of what fuels innovation. And as I think you all understand when people like one part of the portfolio, they tend to also leverage other parts of the portfolio. Other than the AI portfolio automation, which really helps our clients with productivity, Jim mentioned Apptio or Apptio, Turbonomic the whole category called AIOps in the market, we believe, is going to be a big driver of demand for us. And on the mainframe, let’s remember, TP does get driven by increased MIPS, and Jim talked about the increased MIPS that are out there.
Those MIPS, coupled with the innovation we do in that part of the portfolio, drive the growth. So it’s very well balanced. You have M&A, you have Red Hat innovation, you have AI innovation, automation innovation and TP innovation. And that is really what comes together to give us that growth and give us the confidence of being able to deliver all of that growth.
Operator: Thank you. Our next question comes from Toni Sacconaghi with Bernstein. Please state your question.
Toni Sacconaghi: Yes. Thank you. I have one clarification and one question, please. So just on the free cash flow, Jim, I’m wondering, can you give us a bridge from net income, which I think The Street is expecting is about $9 billion or a little over for fiscal ’24 and how you get to $12 billion in free cash flow, not from 2023 levels but from net income levels? And maybe in that, can you just clarify how much do you expect depreciation expense to be? And how much do you expect CapEx to be and how big a contributor is that? And then secondly, on the AI book of business, I think you said low hundreds of millions that doubled. So should we be thinking $300 million to $400 million? And it sounds like a third was in software. Was that revenue recognized during the quarter? And then the other couple of hundred millions were consulting signings? Can you just elaborate specifically on exactly what the book of business means?
Jim Kavanaugh: Okay, Toni. Let me take the first piece, and I appreciate the question as always, and then Arvind can talk about the AI overall. For increased transparency, by the way, coming out of third quarter, where we delivered free cash flow of $1 billion up year-over-year, Arvind and I and many other of the senior leaders, we’ve spent a tremendous amount of time with our investors. And our investors were actually guiding us, coaching us around giving increased transparency about the drivers right at the heart of your question. That’s why we put in both the press release and in the supplemental earnings chart a bridge down from operating pretax income down to adjusted PTI. Why? As I stated in Wamsi’s question, for depicting the quality and sustainability of our free cash flow.
So when you look at 2024, so to your point, I’ll leave ’23 aside. When you look at ’24, it’s entirely going to be driven, and more by the growth in adjusted EBITDA. And when you look at net income and you break it down, there’s not that much difference between net income overall and the adjusted EBITDA overall. So the $900 million is purely a function of the confidence we have in the portfolio, the mix, the scale, the operating leverage and the productivity, which you heard on the prepared remarks, we took up to $3 billion here as an annual exit run rate by the end of 2024. So it’s an entirely driven balance sheet. We’ll have dynamics going one way or the other, cash tax modest headwind but those all kind of wash out. It’s going to be entirely driven by the business fundamentals.
