10-QPeriod: Q1 FY2017

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q1 Ended Mar 31, 2017

Filed April 25, 2017For Securities:IBM

Summary

International Business Machines Corp. (IBM) reported its first-quarter 2017 financial results, showing a slight decrease in total revenue to $18.2 billion from $18.7 billion in the prior year, impacted by currency fluctuations. Net income from continuing operations declined by 13.1% to $1.75 billion, translating to diluted earnings per share of $1.85. Despite the top-line and net income dip, IBM highlighted strong performance in its strategic imperatives—cloud, analytics, mobile, social, and security—which now represent 43% of total revenue, growing 12% year-over-year. Cloud revenue, in particular, saw significant growth, with as-a-Service revenue up 59%. The company generated $4.0 billion in cash from operations, though this was lower than the prior year due to a significant tax refund received in Q1 2016. IBM continued its commitment to shareholder returns, repurchasing $1.3 billion in stock and paying $1.3 billion in dividends.

Financial Highlights

51 data points
Beta

Revenue

$18.16B

43.8% Gross Margin

Net Income

$1.75B

9.6% Net Margin

EPS (Diluted)

$1.85

Total Assets

$117.50B

Cash & Equivalents

$10.10B

Free Cash Flow

$3.21B

Financial Statements
Beta
Revenue$18.16B
Cost of Revenue$10.21B
Gross Profit$7.94B
R&D Expenses$1.48B
SG&A Expenses$5.03B
Operating Income$1.75B
Interest Expense$135.00M
Net Income$1.75B
EPS (Basic)$1.86
EPS (Diluted)$1.85
Shares Outstanding (Basic)942.44M
Shares Outstanding (Diluted)947.84M

Key Highlights

  • 1Total revenue decreased 2.8% to $18.2 billion, or 2.2% adjusted for currency, compared to Q1 2016.
  • 2Net income from continuing operations declined 13.1% to $1.75 billion, with diluted EPS of $1.85.
  • 3Strategic imperatives (cloud, analytics, mobile, social, security) revenue grew 12% to $7.8 billion, representing 43% of total revenue.
  • 4Cloud revenue increased 33% to $3.5 billion, with cloud as-a-Service revenue up 59%.
  • 5Cash from operating activities was $4.0 billion, a decrease from $5.5 billion in Q1 2016, largely due to a prior year tax refund.
  • 6IBM returned $2.6 billion to shareholders through dividends ($1.3 billion) and share repurchases ($1.3 billion).

Frequently Asked Questions

In the first quarter of 2017, IBM reported total revenue of $18.2 billion, a decrease of 2.8% from the prior year. Net income from continuing operations was $1.75 billion, a decrease of 13.1% year-over-year, resulting in diluted earnings per share of $1.85. The company highlighted strong growth in its strategic imperatives, particularly in cloud and analytics.

IBM's strategic imperatives, which include cloud, analytics, mobile, social, and security solutions, continued to show strong growth. They accounted for 43% of total revenue in Q1 2017, an increase from the previous year, and grew 12% year-over-year. Cloud revenue was a significant driver, increasing by 33%.

IBM generated $4.0 billion in cash from operating activities, which was a decrease compared to $5.5 billion in the first quarter of 2016. This decrease was primarily attributed to a significant tax refund received in the prior year's quarter. The company also returned $2.6 billion to shareholders through dividends and share repurchases.

IBM reported mixed performance across its segments. Cognitive Solutions saw revenue growth led by analytics and security. Global Business Services (GBS) revenue declined, though sequential performance improved as the business shifted towards cognitive services and digital platforms. Technology Services & Cloud Platforms revenue decreased, but strategic imperatives within this segment grew strongly, especially cloud. The Systems segment experienced a significant revenue decline due to product cycle dynamics.