Highlights:
- Diluted EPS: GAAP of $2.61; Operating (non-GAAP) of $2.95
- Revenue from continuing operations of $20.2 billion
- Strategic imperatives revenue of $30.7 billion over the last 12 months represents 38 percent of IBM revenue - Strategic imperatives revenue of $8.3 billion in the quarter, up 12 percent year to year
- Cloud revenue of $11.6 billion over the last 12 months - Cloud as-a-service annual run rate of $6.7 billion in the quarter, up 50 percent year to year
IBM today announced second-quarter 2016 earnings results.
"IBM continues to establish itself as the leading cognitive solutions and cloud platform company. In doing so, IBM is pioneering new business opportunities beyond the traditional IT marketplace," said Ginni Rometty, IBM chairman, president and chief executive officer. "In the second quarter we delivered double-digit revenue growth in our strategic imperatives, driven by innovations in areas such as analytics, security, cloud video services and Watson Health, all powered by the IBM Cloud and differentiated by industry. And we continue to invest for growth with recent breakthroughs in quantum computing, Internet of Things and Blockchain solutions for the IBM Cloud."
“In the first half of 2016, we grew our R&D investment, closed 11 acquisitions for more than $5 billion and invested nearly $2 billion in capital expenditures, while returning more than $4 billion to shareholders through dividends and gross share repurchases,” said Martin Schroeter, IBM senior vice president and chief financial officer. “These investments are key in helping us build new markets and maintain our leadership in enterprise IT.”
Strategic Imperatives
Second-quarter revenues from the company’s strategic imperatives --- cloud, analytics and engagement --- increased 12 percent year to year. Cloud revenues (public, private and hybrid) for the quarter increased 30 percent. Cloud revenue over the trailing 12 months was $11.6 billion. The annual run rate for cloud as-a-service revenue --- a subset of total cloud revenue --- increased to $6.7 billion from $4.5 billion in the second quarter of 2015. Revenues from analytics increased 5 percent (up 4 percent adjusting for currency). Revenues from mobile increased 43 percent and from security increased 18 percent.
Full-Year 2016 Expectations
The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.50. This excludes $1.27 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. As a result, GAAP diluted earnings per share are now expected to be at least $12.23. There is no change to IBM's previously provided free cash flow guidance.
Cash Flow and Balance Sheet
The company generated net cash from operating activities of $3.4 billion; or $3.1 billion excluding Global Financing receivables. IBM’s free cash flow was $2.1 billion in the second quarter. IBM returned $1.3 billion in dividends and $0.8 billion of gross share repurchases to shareholders. At the end of June 2016, IBM had $3.9 billion remaining in the current share repurchase authorization.
IBM ended the second-quarter 2016 with $10.6 billion of cash on hand. Debt, including Global Financing debt of $26.5 billion, totaled $44.5 billion. Core (non-global financing) debt totaled $18.0 billion. The balance sheet remains strong and is well positioned to support the business over the long term.
