IBM second-quarter results beat on top and bottom lines

Technology
Monday, July 18th, 2022 1:13 pm EDT

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IBM CEO Arvind Krishna appears at a panel session at the World Economic Forum in Davos, Switzerland, on May 24, 2022.
Hollie Adams | Bloomberg | Getty Images

IBM issued second-quarter results on Monday that were better than expected.

Here’s how the company did:

  • Earnings: $2.31 per share, adjusted, vs. $2.27 per share as expected by analysts, according to Refinitiv.
  • Revenue: $15.54 billion, vs. $15.18 billion as expected by analysts, according to Refinitiv.

IBM’s revenue rose 9% year over year in the quarter, according to a statement. Income from continuing operations increased to $1.47 billion from $810 million in the year-ago quarter. IBM spun off its managed infrastructure services business into publicly traded Kyndryl in November, and sales to Kyndryl boosted IBM’s revenue.

Management called for $10 billion in free cash flow for all of 2022, down from the range of $10 billion to $10.5 billion that it provided in April. Executives reiterated their plan for constant-currency revenue growth at the high end of their mid-single-digit model for the year.

IBM reported $6.17 billion in software revenue in the second quarter, up 6% but below the $6.3 billion consensus among analysts polled by StreetAccount.

The company’s consulting division generated $4.81 billion in revenue, jumping nearly 10% and surpassing the StreetAccount consensus of $4.67 billion.

IBM’s infrastructure unit, which includes mainframe computers, contributed $4.24 billion in revenue, up almost 19% and well above the $3.79 billion StreetAccount consensus. On May 31, IBM started selling its latest mainframe, the z16. Each mainframe cycle generally brings revenue growth at the beginning as customers upgrade, followed by a decline.

Also in the quarter, IBM announced a plan to acquire cybersecurity startup Randori, and Francisco Partners closed its acquisition IBM’s Watson health care data and analytics assets in a deal reportedly worth more than $1 billion.

IBM’s gross margin narrowed to 53.4% from 55.2% in the year-ago quarter.

Prior to the after-hours move, IBM shares were up 3% so far this year, while the S&P 500 index tumbled about 20%.

Executives will discuss the results with analysts on a conference call starting at 5 p.m. ET.

This story is developing. Please check back for updates.

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