IBM announced first-quarter 2023 earnings results.
"Our first quarter results demonstrate that clients continue turning to IBM for our unique combination of an open hybrid cloud platform, enterprise-focused AI, and business expertise to unlock productivity and drive efficiency in their operations," said Arvind Krishna, IBM chairman and chief executive officer. "This gives us confidence in our current growth expectations for revenue and free cash flow for the year."
First-Quarter Highlights
- Revenue
- Revenue of $14.3 billion, up 0.4 percent, up 4.4 percent at constant currency
- Software revenue up 3 percent, up 6 percent at constant currency
- Consulting revenue up 3 percent, up 8 percent at constant currency
- Infrastructure revenue down 4 percent, flat at constant currency - Cash Flow
- Net cash from operating activities of $3.8 billion, up $0.5 billion; free cash flow of $1.3 billion, up $0.1 billion
"In the quarter, we remained focused on the fundamentals of our business, increasing productivity and generating operating leverage," said James Kavanaugh, IBM senior vice president and chief financial officer. "As a result, we again expanded our gross profit margin, improved our underlying profit performance and increased our cash generation. We are well-positioned to continue investing for growth and returning value to shareholders through dividends."
Segment Results for First Quarter
- Software — revenues of $5.9 billion, up 2.6 percent, up 5.6 percent at constant currency:
- Hybrid Platform & Solutions up 2 percent, up 5 percent at constant currency:
-- Red Hat up 8 percent, up 11 percent at constant currency
-- Automation down 1 percent, up 2 percent at constant currency
-- Data & AI up 1 percent, up 3 percent at constant currency
-- Security down 1 percent, up 2 percent at constant currency
- Transaction Processing up 3 percent, up 7 percent at constant currency - Consulting — revenues of $5.0 billion, up 2.8 percent, up 8.2 percent at constant currency:
- Business Transformation up 1 percent, up 6 percent at constant currency
- Technology Consulting down 1 percent, up 4 percent at constant currency
- Application Operations up 7 percent, up 13 percent at constant currency - Infrastructure — revenues of $3.1 billion, down 3.7 percent, up 0.1 percent at constant currency:
- Hybrid Infrastructure up 1 percent, up 4 percent at constant currency:
-- z Systems up 7 percent, up 11 percent at constant currency
-- Distributed Infrastructure down 3 percent, flat at constant currency
- Infrastructure Support down 9 percent, down 4 percent at constant currency - Financing — revenues of $0.2 billion, up 27.3 percent, up 31.0 percent at constant currency
Cash Flow and Balance Sheet
In the first quarter, the company generated net cash from operating activities of $3.8 billion, up $0.5 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $1.8 billion. IBM's free cash flow was $1.3 billion, up $0.1 billion year to year.
IBM ended the first quarter with $17.6 billion of cash and marketable securities, up $8.8 billion from year-end 2022. Debt, including IBM Financing debt of $10.5 billion, totaled $58.7 billion, up $7.8 billion since the end of 2022. The company returned $1.5 billion to shareholders in dividends in the first quarter.
Full-Year 2023 Expectations
- Revenue: The company expects constant currency revenue growth of three percent to five percent. At current foreign exchange rates, currency is expected to be neutral to revenue growth.
- Free cash flow: The company continues to expect about $10.5 billion in free cash flow, up more than $1 billion year to year.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
IBM results —
- adjusting for currency (i.e., at constant currency);
- presenting operating (non-GAAP) earnings per share amounts and related income statement items;
- free cash flow;
- cash from operating activities excluding IBM Financing receivables.
The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8–K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EDT, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-1q23. Presentation charts will be available shortly before the Webcast.
