10-QPeriod: Q2 FY2021

INTERNATIONAL BUSINESS MACHINES CORP Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 27, 2021For Securities:IBM

Summary

International Business Machines Corporation (IBM) reported its second-quarter 2021 financial results, showing a 3.4% increase in total revenue to $18.7 billion, driven by growth in Cloud & Cognitive Software and Global Business Services, though partially offset by a decline in Systems. For the six-month period, revenue rose 2.2% to $36.5 billion. Net income from continuing operations for the quarter was $1.325 billion, a decrease of 2.7% year-over-year, resulting in diluted earnings per share of $1.47. On an operating (non-GAAP) basis, which excludes certain charges, diluted EPS was $2.33, an increase of 6.9%. The company generated strong operating cash flow of $2.6 billion for the quarter and highlighted its strategic focus on hybrid cloud and AI, underscored by several key acquisitions in the period, including Turbonomic. IBM also continued its deleveraging efforts, reducing total debt by $6.4 billion year-to-date.

Financial Highlights

49 data points
Beta

Revenue

$14.22B

55.2% Gross Margin

Net Income

$1.32B

9.3% Net Margin

EPS (Diluted)

$1.47

Total Assets

$146.81B

Cash & Equivalents

$7.35B

Free Cash Flow

$2.06B

Financial Statements
Beta
Revenue$14.22B
Cost of Revenue$6.37B
Gross Profit$7.85B
R&D Expenses$1.64B
SG&A Expenses$4.85B
Operating Income$1.21B
Interest Expense$281.00M
Net Income$1.32B
EPS (Basic)$1.48
EPS (Diluted)$1.47
Shares Outstanding (Basic)895.04M
Shares Outstanding (Diluted)904.23M

Key Highlights

  • 1Total revenue increased 3.4% to $18.7 billion in Q2 2021, with Cloud & Cognitive Software up 6.1% and Global Business Services up 11.6%.
  • 2Diluted earnings per share from continuing operations were $1.47, a decrease of 3.3% year-over-year.
  • 3Operating (non-GAAP) diluted earnings per share increased 6.9% to $2.33, reflecting the company's focus on operational performance.
  • 4Net cash from operating activities was $7.5 billion for the first six months of 2021, demonstrating consistent cash generation.
  • 5IBM continues to execute its hybrid cloud and AI strategy, evidenced by seven acquisitions in the first half of 2021, including Turbonomic for $1.8 billion.
  • 6Total debt was reduced by $6.4 billion in the first six months of 2021, continuing the company's deleveraging efforts.
  • 7The company reiterated its plan to separate its managed infrastructure services unit (Kyndryl) by the end of 2021.

Frequently Asked Questions

IBM reported total consolidated revenue of $18.7 billion, an increase of 3.4% compared to the prior-year period. Growth was primarily driven by Cloud & Cognitive Software (up 6.1%) and Global Business Services (up 11.6%).

Net income from continuing operations was $1.325 billion, a decrease of 2.7% year-over-year, resulting in diluted EPS of $1.47. However, on an operating (non-GAAP) basis, which excludes certain items, diluted EPS increased by 6.9% to $2.33, indicating operational improvements.

IBM announced its plan to separate its managed infrastructure services unit into a new public company, Kyndryl, via a spin-off to shareholders. The separation is expected to be completed by the end of 2021 and has been progressing with financial, legal, and regulatory milestones.

IBM continued its deleveraging efforts, reducing total debt by $6.4 billion in the first six months of 2021. The company stated its debt levels have decreased significantly since the Red Hat acquisition and it remains committed to its debt pay-down strategy while investing in its business and maintaining its dividend policy.