Summary
International Business Machines Corporation (IBM) reported a decrease in revenue for the third quarter and the first nine months of 2015 compared to the prior year, largely attributed to currency headwinds and the divestiture of its industry-standard server business (System x). Despite the revenue decline, IBM demonstrated progress in its strategic transformation, with 'strategic imperatives' (cloud, analytics, social, mobile, security) growing robustly. The company is actively investing in these higher-value areas, which is impacting profitability in the short term but is intended to drive long-term growth. Key segments like Global Technology Services (GTS) showed resilience in adjusted revenue, while Global Business Services (GBS) faced headwinds due to market shifts in enterprise applications. Management highlighted ongoing efforts to shift spending and capabilities towards strategic growth areas, including acquisitions to bolster its cloud and cognitive computing offerings. Financially, IBM maintained a strong cash flow from operations, enabling significant returns to shareholders through dividends and share repurchases. The company's financial position remained solid, with ample liquidity and a commitment to managing its debt and capital structure effectively. While the reported net income saw a significant increase year-over-year due to the absence of a large loss from discontinued operations in the prior year, the core operating results showed a decline, reflecting the ongoing business transformation and strategic investments. IBM provided updated full-year 2015 guidance, indicating expectations for continued revenue challenges due to currency and market shifts, but maintained a positive outlook on its strategic imperatives and long-term earnings per share growth.
Financial Highlights
51 data points| Revenue | $19.28B |
| Cost of Revenue | $9.84B |
| Gross Profit | $9.44B |
| R&D Expenses | $1.29B |
| SG&A Expenses | $4.73B |
| Interest Expense | $117.00M |
| Net Income | $2.95B |
| EPS (Basic) | $3.03 |
| EPS (Diluted) | $3.01 |
| Shares Outstanding (Basic) | 975.10M |
| Shares Outstanding (Diluted) | 979.00M |
Key Highlights
- 1Total revenue for Q3 2015 decreased by 13.9% (1.4% adjusted for currency and divestitures) to $19.28 billion.
- 2Net income increased significantly to $2.95 billion from $18 million in Q3 2014, primarily due to the absence of a large loss from discontinued operations in the prior year.
- 3Strategic imperatives (cloud, analytics, social, mobile, security) revenue grew 17% as reported and 27% adjusted for currency and divestitures.
- 4Global Technology Services (GTS) revenue grew 1% year-over-year on an adjusted basis, while Global Business Services (GBS) saw a 5% decline on an adjusted basis.
- 5Systems Hardware revenue declined significantly but showed adjusted growth of 10% year-over-year, driven by strong performance in z Systems.
- 6The company generated $11.7 billion in cash flow from operations for the first nine months of 2015.
- 7IBM updated its full-year 2015 guidance, expecting GAAP earnings per diluted share from continuing operations between $13.25 - $14.25 and operating (non-GAAP) earnings between $14.75 - $15.75.