IBM Q2 2022 Earnings

IBM Q2 2022 Earnings
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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.

Holly Adams | Mayor Bloomberg | fake images

IBM shares fell as much as 4% in extended trading on Monday after the company cut its 2022 cash forecast. It still beats on the top and bottom lines.

Here’s how the company did it:

  • Profits: $2.31 per share, adjusted vs. $2.27 a share as analysts expected, according to Refinitiv.
  • Income: $15.54 billion vs. $15.18 billion as analysts expected, 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 prior year quarter. IBM spun off its managed infrastructure services business into publicly traded companies kyndril in November, and sales to Kyndryl boosted IBM’s revenue.

Management requested $10 billion in free cash flow for all of 2022, down from the $10 billion to $10.5 billion range it provided April. Executives reiterated their constant-currency revenue growth plan at the high end of their mid-single-digit model for the year. IBM said it sees a 6% impact on full-year revenue from foreign exchange rates, compared with 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 consensus of $6.3 billion among analysts surveyed by StreetAccount.

The company’s consulting division generated $4.81 billion in revenue, up nearly 10% and beating StreetAccount’s 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 StreetAccount’s consensus of $3.79 billion. On May 31, IBM began selling its latest mainframe, the z16. Each mainframe cycle typically sees revenue growth at first as customers upgrade, followed by decline. Sales of z Systems products increased 69%, compared to a 19% drop in the first quarter.

Also in the quarter, IBM Announced a plan to acquire cybersecurity startup Randori and Francisco Partners closed its acquisition of Watson healthcare data and analytics assets from IBM in a deal reportedly value of more than $1 billion.

IBM’s gross margin fell to 53.4% ​​from 55.2% in the prior year quarter. The company said the competitive job market hurt results at its consulting arm, continuing a trend it saw earlier in the year.

Before the after-hours move, IBM shares are up 3% year-to-date while the S&P 500 index is down about 20%.

Executives will discuss the results with analysts in a conference call beginning at 5 pm ET.

This story is developing. Please check for updates.

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