IBM announced second-quarter 2024 earnings results.
"We had a strong second quarter, exceeding our expectations, driven by growth in both revenue and free cash flow. We continue to see that clients turn to IBM for our technology and our expertise in enterprise AI, and our book of business for generative AI has grown to more than two billion dollars since the launch of watsonx one year ago," said Arvind Krishna, IBM chairman and chief executive officer. "Given our first-half results, we are raising our full-year view of free cash flow, which we now expect to be more than $12 billion."
Second-Quarter Highlights
- Revenue
- Revenue of $15.8 billion, up 2 percent, up 4 percent at constant currency
- Software revenue up 7 percent, up 8 percent at constant currency
- Consulting revenue down 1 percent, up 2 percent at constant currency
- Infrastructure revenue up 1 percent, up 3 percent at constant currency - Profit Margin
- Gross Profit Margin: GAAP: 56.8 percent, up 180 basis points; Operating (Non-GAAP): 57.8 percent, up 190 basis points
- Pre-Tax Income Margin: GAAP: 14.1 percent, up 110 basis points; Operating (Non-GAAP): 17.7 percent, up 220 basis points - Cash Flow
- Year to date, net cash from operating activities of $6.2 billion, down $0.2 billion; free cash flow of $4.5 billion, up $1.1 billion
- Over the last twelve months, net cash from operating activities of $13.8 billion; free cash flow of $12.3 billion
|
SECOND QUARTER 2024 INCOME STATEMENT SUMMARY |
||||||||||||||||||||
|
Revenue |
Gross Profit |
Gross |
Pre-tax Income |
Pre-tax Income Margin |
Net Income |
Diluted Earnings Per Share |
||||||||||||||
|
GAAP from |
$ 15.8 B |
$ 8.9 B |
56.8 |
% |
$ 2.2 B |
14.1 |
% |
$ 1.8 B |
$ 1.96 |
|||||||||||
|
Year/Year |
2 |
%(1) |
5 |
% |
1.8 |
Pts |
11 |
% |
1.1 |
Pts |
16 |
% |
14 |
% |
||||||
|
Operating (Non-GAAP) |
$ 9.1 B |
57.8 |
% |
$ 2.8 B |
17.7 |
% |
$ 2.3 B |
$ 2.43 |
||||||||||||
|
Year/Year |
5 |
% |
1.9 |
Pts |
17 |
% |
2.2 |
Pts |
14 |
% |
11 |
% |
||||||||
|
(1) 4% at constant currency. |
||||||||||||||||||||
"In the quarter, we accelerated our revenue growth as we continue to execute well on our strategy. Our business fundamentals, operating leverage, product mix and productivity initiatives all contributed to significant margin expansion and increased profit and free cash flow," said James Kavanaugh, IBM senior vice president and chief financial officer. "Our strong cash generation enables us to continue investing in innovation and expertise across the portfolio, while returning value to shareholders through dividends."
Segment Results for Second Quarter
- Software — revenues of $6.7 billion, up 7.1 percent, up 8.4 percent at constant currency:
- Hybrid Platform & Solutions up 5 percent, up 6 percent at constant currency:
-- Red Hat up 7 percent, up 8 percent at constant currency
-- Automation up 15 percent, up 16 percent at constant currency
-- Data & AI down 3 percent, down 2 percent at constant currency
-- Security up 2 percent, up 3 percent at constant currency
- Transaction Processing up 11 percent, up 13 percent at constant currency - Consulting — revenues of $5.2 billion, down 0.9 percent, up 1.8 percent at constant currency:
- Business Transformation up 3 percent, up 6 percent at constant currency
- Technology Consulting down 3 percent, up 1 percent at constant currency
- Application Operations down 4 percent, down 2 percent at constant currency - Infrastructure — revenues of $3.6 billion, up 0.7 percent, up 2.7 percent at constant currency:
- Hybrid Infrastructure up 4 percent, up 6 percent at constant currency
-- IBM Z up 6 percent, up 8 percent at constant currency
-- Distributed Infrastructure up 3 percent, up 5 percent at constant currency
- Infrastructure Support down 5 percent, down 3 percent at constant currency - Financing — revenues of $0.2 billion, down 8.3 percent, down 6.6 percent at constant currency
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.1 billion, down $0.6 billion year to year. IBM's free cash flow was $2.6 billion, up $0.5 billion year to year. The company returned $1.5 billion to shareholders in dividends in the second quarter.
For the first six months of the year, the company generated net cash from operating activities of $6.2 billion, down $0.2 billion year to year. IBM's free cash flow was $4.5 billion, up $1.1 billion year to year. Over the last twelve months, the company generated net cash from operating activities of $13.8 billion and free cash flow of $12.3 billion.
IBM ended the second quarter with $16.0 billion of cash, restricted cash and marketable securities, up $2.5 billion from year-end 2023. Debt, including IBM Financing debt of $11.1 billion, totaled $56.5 billion, flat year to date.
Full-Year 2024 Expectations
- Revenue: The company continues to expect constant currency revenue growth consistent with its mid-single digit model. At current foreign exchange rates, currency is expected to be about a one to two-point headwind to revenue growth
- Free cash flow: The company now expects more than $12 billion in free cash flow
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q24. Presentation charts will be available shortly before the Webcast.
