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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