IBM CEO Arvind Krishna will appear at a panel discussion at the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Hollie Adams | Bloomberg | Getty pictures
On Monday, IBM released second-quarter results that were better than expected. However, the stock fell in expanded trading after the company trimmed its cash flow forecast.
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- Earnings: $ 2.31 per share, adjusted, against $ 2.27 per share as expected by analysts, according to Refinitiv.
- Revenue: $ 15.54 billion, compared to $ 15.18 billion as expected by analysts, according to Refinitiv.
IBM’s revenue increased 9% year-over-year in the quarter, according to a statement. Revenue from continuing operations increased to $ 1.47 billion from $ 810 million in the quarter last year. IBM separated its managed infrastructure services business to listed Kyndryl in November, and sales to Kyndryl increased IBM’s revenue.
Management called for $ 10 billion in free cash flow for the whole of 2022, down from the $ 10 billion range to $ 10.5 billion that they provided in April. Leaders reiterated their plan for steady growth in foreign exchange earnings at the high end of their mid-year model. IBM said it sees a 6% impact on full-year earnings from exchange rates, compared to a range of 3% to 4% in April.
IBM reported $ 6.17 billion in software revenue in the second quarter, up 6%, but below the $ 6.3 billion consensus among analysts asked by StreetAccount.
The company’s consulting department generated $ 4.81 billion in revenue, jumped nearly 10% and exceeded the StreetAccount consensus of $ 4.67 billion.
IBM’s infrastructure unit, which includes mainframe computers, contributed $ 4.24 billion in revenue, up nearly 19% and well above the $ 3.79 billion StreetAccount consensus. On May 31, IBM began selling its latest mainframe, the z16. Each mainframe cycle generally generates revenue growth at the beginning when customers upgrade, followed by a decline. Sales of z Systems products increased by 69%, compared with a decrease of 19% in the first quarter.
Also in the quarter, IBM announced a plan to buy cybersecurity startup Randori, and Francisco Partners completed the acquisition of IBM’s Watson healthcare data and analytics resources in a deal worth more than $ 1 billion.
IBM’s gross margin was reduced to 53.4% from 55.2% in the quarter last year. The company said that the competitive labor market affected the results in the consulting department, and continued a trend they saw earlier in the year.
Before the move after working hours, the IBM share was up 3% so far this year, while the S&P 500 index fell around 20%.
Leaders will discuss the results with analysts at a conference call starting at 17.00 ET.
This story is evolving. Please check back for updates.
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