10-QPeriod: Q3 FY2018

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its financial results for the third quarter and first nine months of 2018. For the third quarter, revenue was $18.8 billion, a slight decrease of 2.1% from the prior year, but flat adjusted for currency. Net income was $2.7 billion, or $2.94 per diluted share. On an operating (non-GAAP) basis, which excludes certain items like acquisition-related charges and non-operating retirement costs, operating earnings were $3.1 billion, or $3.42 per diluted share, representing a 4.9% increase year-over-year. The company highlighted continued strength in strategic imperatives, particularly cloud and security offerings, despite a revenue decline in its Cognitive Solutions segment. For the first nine months, revenue increased 2.2% to $57.8 billion, and net income was $6.8 billion, or $7.37 per diluted share. Operating earnings were $8.2 billion, or $8.96 per diluted share, up 4.9% from the prior year. IBM generated strong cash flow from operations, amounting to $11.1 billion for the nine-month period. The company also continued its commitment to returning value to shareholders through dividends and share repurchases. Management expressed confidence in the company's long-term strategy, focusing on innovative technologies like AI and cloud, and maintaining a strong financial position. The company reaffirmed its full-year 2018 outlook for both GAAP and operating earnings per share and free cash flow.

Financial Statements
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Key Highlights

  • 1Total revenue for the third quarter was $18.8 billion, down 2.1% year-over-year but flat adjusted for currency, reflecting mixed segment performance.
  • 2Net income for the third quarter was $2.7 billion, or $2.94 per diluted share. Operating (non-GAAP) earnings were $3.1 billion, or $3.42 per diluted share, up 4.9% year-over-year.
  • 3Strategic imperatives, including cloud and security, showed continued growth, with cloud revenue increasing 13% (adjusted for currency) year-over-year in the third quarter.
  • 4Global Business Services (GBS) revenue increased 0.9% year-over-year (2.5% adjusted for currency) in the third quarter, driven by consulting services.
  • 5Systems revenue saw a modest increase of 0.9% year-over-year (1.8% adjusted for currency) in the third quarter, with strong growth in IBM Z and Power Systems.
  • 6Cash flow from operating activities for the first nine months of 2018 was $11.1 billion, an increase from the prior year.
  • 7The company reaffirmed its full-year 2018 outlook, expecting GAAP earnings per share of at least $11.60 and operating earnings per share of at least $13.80.

Frequently Asked Questions

IBM's total revenue for the third quarter of 2018 was $18.8 billion, a decrease of 2.1% compared to the prior year. However, when adjusted for currency fluctuations, the revenue was flat, indicating stable performance in constant currency terms.

For the third quarter of 2018, IBM reported net income of $2.7 billion, or $2.94 per diluted share on a GAAP basis. On an operating (non-GAAP) basis, which excludes certain items, the company reported earnings of $3.1 billion, or $3.42 per diluted share, representing a 4.9% increase year-over-year.

Strategic imperatives, such as cloud and security, continued to show growth. The Global Business Services segment saw revenue increase, driven by consulting services. However, the Cognitive Solutions segment experienced a revenue decline. Systems revenue showed a modest increase, supported by IBM Z and Power Systems.

IBM reaffirmed its full-year 2018 outlook, expecting GAAP earnings per share from continuing operations of at least $11.60 and operating (non-GAAP) earnings per share of at least $13.80. The company also anticipates free cash flow to be approximately $12 billion for the year.