01—Abstract
Summary
Summary of the 10-Q filed October 30, 2024. Cited figures are marked; the original filing is the authoritative source.
IBM reported total revenue of $14.97 billiona for the third quarter of 2024, a 1.5% increase year-over-year, or 1.6% adjusted for currency.
The company experienced a net loss of $330 millionb ($0.36 per share), significantly impacted by a one-time, non-cash pension settlement charge of $2.7 billion ($2.0 billion net of tax). Despite the reported net loss, IBM's operating (non-GAAP) earnings were $2.16 billion ($2.30 per share), reflecting growth driven by accelerated Software revenue and expanded gross profit margins across segments. Software revenue grew 9.7% year-over-year, led by Hybrid Platform & Solutions.
Consulting revenue saw a slight decline, while Infrastructure revenue decreased due to product cycle dynamics. The company generated strong operating cash flow of $2.9 billionc and free cash flow of $2.1 billion in the quarter, demonstrating operational resilience and a commitment to returning value to shareholders through dividends.
02—Key points
Key Highlights
- Total revenue increased by 1.5% year-over-year to $14.97 billion, driven by Software segment growth.
- A significant one-time, non-cash pension settlement charge of $2.7 billion ($2.0 billion net of tax) resulted in a reported net loss of $330 million ($0.36 per share).
- Operating (non-GAAP) earnings were $2.16 billion ($2.30 per share), up 4.5% year-over-year, showcasing underlying business strength.
- Software segment revenue grew 9.7% year-over-year, with strong performance in Hybrid Platform & Solutions, Automation, and Data & AI.
- Consulting revenue experienced a slight decline of 0.5%, impacted by macroeconomic uncertainty and client reprioritization towards AI.
- Infrastructure revenue decreased by 7.0%, primarily due to product cycle dynamics in Hybrid Infrastructure and Infrastructure Support.
- Cash from operating activities was $2.9 billion, and free cash flow was $2.1 billion for the quarter.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2024, International Business Machines Corp lost $0.02.
- Revenue$14.97B100.0%
- Cost of revenue−$6.55B43.7%
- Gross profit$8.42B56.3%
- Operating costs−$5.33B35.6%
- Operating income$3.09B20.6%
- Interest, other & tax−$3.42B22.8%
- Net income−$330.0M2.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 30, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $14.97B$14.75B | +1.5% |
| Cost of Revenue | $6.55B$6.73B | −2.7% |
| Gross Profit | $8.42B$8.02B | +4.9% |
| R&D Expenses | $1.88B$1.69B | +11.3% |
| SG&A Expenses | $4.91B$4.46B | +10.2% |
| Operating Income | $3.09B$4.23B | −27.0% |
| Interest Expense | $429.00M$412.00M | +4.1% |
| Net Income | -$330.00M$1.70B | −119.4% |
| EPS (Basic) | $-0.36$1.87 | −119.3% |
| EPS (Diluted) | $-0.36$1.84 | −119.6% |
| Shares Outstanding (Basic) | 923.58M912.79M | +1.2% |
| Shares Outstanding (Diluted) | 923.58M923.67M | 0.0% |
05—Questions
Frequently Asked Questions
What caused the reported net loss in the third quarter of 2024?
The reported net loss of $330 million was primarily due to a one-time, non-cash pension settlement charge of $2.7 billion ($2.0 billion net of tax) recognized in the quarter. This charge resulted from the transfer of a portion of IBM's defined benefit pension obligations and related plan assets to an insurance company.
How did the Software segment perform in the third quarter?
The Software segment showed strong performance, with revenue increasing by 9.7% year-over-year to $6.52 billion. This growth was driven by Hybrid Platform & Solutions (up 9.8%), Automation, and Data & AI. The segment's profit also increased by 14.4%, with a segment profit margin of 30.2%.
What is the outlook for Consulting revenue given the economic environment?
Consulting revenue decreased by 0.5% year-over-year, impacted by a challenging macroeconomic environment that is causing clients to reprioritize spending, particularly towards AI initiatives. While short-term discretionary projects are affected, IBM is seeing strong demand for larger digital transformation projects and is positioning itself as a strategic partner for AI adoption.
How did the company manage its cash flow and capital resources during the quarter?
IBM generated $2.9 billion in cash from operating activities and $2.1 billion in free cash flow during the third quarter. The company maintained a strong liquidity position with $13.7 billion in cash, cash equivalents, and marketable securities, while managing its debt levels effectively.
06—Continue