10-QPeriod: Q2 FY2018

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 31, 2018For Securities:IBM

Summary

International Business Machines Corp. (IBM) reported solid results for the second quarter and first half of 2018, demonstrating continued momentum in its strategic imperatives, particularly in cloud and security. Total revenue for the second quarter increased 3.7% to $20.0 billion, with constant currency growth of 1.6%, marking the highest in seven years. Net income rose by 3.1% to $2.4 billion, and diluted earnings per share (EPS) from continuing operations increased by 5.2% to $2.61. The company highlighted strong performance in its Systems segment, with revenue up 24.6%, driven by IBM Z adoption. Strategic imperatives revenue, encompassing cloud, security, analytics, and mobile, grew 15% to $10.1 billion in the second quarter, representing 48% of total revenue for the first half of the year. Cloud revenue, in particular, saw a 20% increase. Despite overall revenue growth, gross margin slightly decreased due to investments in cloud infrastructure and a shift in revenue mix. The company generated $2.3 billion in cash from operations in the second quarter and reiterated its full-year guidance, expecting GAAP EPS of at least $11.60 and operating (non-GAAP) EPS of at least $13.80.

Financial Highlights

51 data points
Beta

Revenue

$20.00B

46.0% Gross Margin

Net Income

$2.40B

12.0% Net Margin

EPS (Diluted)

$2.61

Total Assets

$121.62B

Cash & Equivalents

$10.74B

Free Cash Flow

$1.36B

Financial Statements
Beta
Revenue$20.00B
Cost of Revenue$10.80B
Gross Profit$9.20B
R&D Expenses$1.36B
SG&A Expenses$4.86B
Operating Income$4.08B
Interest Expense$173.00M
Net Income$2.40B
EPS (Basic)$2.63
EPS (Diluted)$2.61
Shares Outstanding (Basic)915.06M
Shares Outstanding (Diluted)919.40M

Key Highlights

  • 1Total revenue for Q2 2018 increased by 3.7% year-over-year to $20.0 billion, with constant currency growth of 1.6%.
  • 2Net income grew by 3.1% to $2.4 billion, and diluted EPS from continuing operations rose 5.2% to $2.61.
  • 3Strategic imperatives revenue (Cloud, Security, Analytics, Mobile) grew 15% year-over-year in Q2 2018, reaching $10.1 billion.
  • 4The Systems segment experienced robust growth, with revenue increasing 24.6% driven by strong IBM Z adoption.
  • 5Cloud revenue increased by 20% year-over-year in Q2 2018, with as-a-Service revenue growing 26% and reaching an annualized run rate of $11.1 billion.
  • 6Cash from operations for Q2 2018 was $2.3 billion.
  • 7IBM reiterated its full-year 2018 guidance for GAAP EPS of at least $11.60 and operating (non-GAAP) EPS of at least $13.80.

Frequently Asked Questions

IBM reported total revenue of $20.0 billion for the second quarter of 2018, an increase of 3.7% compared to the same period in 2017. This growth was 1.6% when adjusted for currency fluctuations, marking the company's strongest constant currency growth in seven years.

IBM's strategic imperatives, which include cloud, security, analytics, and mobile technologies, showed strong momentum. In the second quarter of 2018, revenue from strategic imperatives increased by 15% year-over-year to $10.1 billion. Cloud revenue specifically grew by 20%, with its as-a-Service offering reaching an annualized run rate of $11.1 billion.

Net income for the second quarter of 2018 was $2.4 billion, a 3.1% increase from the prior year. Diluted earnings per share from continuing operations were $2.61, a 5.2% increase year-over-year. The company also reaffirmed its full-year guidance, expecting GAAP EPS of at least $11.60 and operating (non-GAAP) EPS of at least $13.80.

IBM generated $2.3 billion in cash from operations during the second quarter of 2018. The company also reaffirmed its expectation to generate approximately $12 billion in free cash flow for the full year 2018.