IBM Posts Double-Digit Cloud Revenue Growth

Asia Blockchain Review

October 21, 2020

According to Reuters, International Business Machines Corp edged past Wall Street estimates for quarterly revenue on Monday, bolstered by higher demand for its cloud services, a business it is staking its future on as it prepares to spin off one of its legacy units.

  • GAAP EPS from continuing operations of $1.89
  • Operating (non-GAAP) EPS of $2.58
  • Revenue of $17.6 billion, down 2.6 percent (down 3.1 percent adjusting for divested businesses and currency)
  • Cloud & Cognitive Software revenue up 7 percent (up 6 percent adjusting for currency)
  • Total cloud revenue of $6.0 billion, up 19 percent
  • Total cloud revenue of $24.4 billion over the last 12 months, up 22 percent (up 25 percent adjusting for divested businesses and currency)
  • Red Hat revenue up 17 percent (up 16 percent adjusting for currency), normalized for historical comparability
  • GAAP gross profit margin of 48 percent, up 180 basis points; Operating (non-GAAP) gross profit margin of 49 percent, up 160 basis points
  • Net cash from operating activities of $15.8 billion and free cash flow of $10.8 billion, over the last 12 months.

Cash Flow and Balance Sheet
In the third quarter, the company generated net cash from operating activities of $4.3 billion, or $1.9 billion excluding Global Financing receivables. IBM’s free cash flow was $1.1 billion. The company returned $1.5 billion to shareholders in dividends. IBM ended the third quarter with $15.8 billion of cash on hand which includes marketable securities, up $6.7 billion from year-end 2019. Debt, including Global Financing debt of $20.9 billion, totaled $65.4 billion.

Segment Results for Third Quarter

Segment results reflect growing adoption of IBM’s open hybrid cloud platform while clients continue to shift priorities to preserve cash and maintain operational stability.

  • Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat, Cognitive Applications and Transaction Processing Platforms) — revenues of $5.6 billion, up 7 percent (up 6 percent adjusting for currency).
  • Cloud & Data Platforms, grew 20 percent (up 19 percent adjusting
    for currency) led by Red Hat. Cognitive Applications grew 1 percent (flat adjusting for currency), led by Security and Supply Chain. Transaction Processing Platforms declined. Cloud revenue grew more than 60 percent.
  • Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.0 billion, down 5 percent (down 6 percent adjusting for currency), driven by declines in Application Management and Consulting.
  • Cloud revenue up 10 percent (up 9 percent adjusting for currency). Gross profit margin up 190 basis points.
  • Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.5 billion, down 4 percent.
  • Cloud revenue up 9 percent (up 8 percent adjusting for currency).
  • Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.3 billion, down 15 percent (down 16 percent adjusting for currency), driven by declines in IBM Z and Storage Systems, reflecting the impact of product cycle dynamics.
  • Global Financing (includes financing and used equipment sales) — revenues of $273 million, down 20 percent.

Source: Reuters and IBM

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