IBM earnings for the second quarter of 2022

Arvind Krishna, CEO of International Business Machines Corporation (IBM), during a televised interview in San Francisco, California on July 13, 2022.

David Paul Morris | Bloomberg | Getty Images

IBM The stock fell 4% in extended trading on Monday after the company cut its 2022 cash forecast. He still hits the top and bottom lanes.

Here’s how the company did it:

  • Income: Adjusted to $2.31/share versus $2.27/share, in line with analysts’ expectations, Refinitiv said.
  • Income: $15.54 billion, against $15.18 billion, as analysts expected, reports Refinitiv.

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

“We are targeting about five to six points of revenue growth from Kyndryl sales in 2022,” IBM CFO Jim Cavanaugh said on a conference call with analysts.

Management has called for $10 billion of free cash flow for all of 2022, compared to the $10 billion to $10.5 billion range it has provided. in April. Executives reaffirmed their constant-currency top-line growth target at the high end of their full-year model in the mid-single digits. The currency negatively impacted reported revenue by more than 6% growth, or $900 million, up $200 more than reported three months ago, Kavanaugh said.

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

The company’s consulting division posted revenue of $4.81 billion, up nearly 10% and beating StreetAccount’s consensus estimate of $4.67 billion.

IBM’s infrastructure division, which includes mainframes, generated $4.24 billion in revenue, up nearly 19% and well above StreetAccount’s consensus estimate of $3.79 billion. On May 31, IBM began selling its latest mainframe, Z16. Each mainframe cycle typically sees revenue growth at the beginning as customers upgrade, followed by a decline. Sales of z Systems products rose 69% from a 19% drop in the first quarter.

Also in the IBM quarter announced plan to acquire cybersecurity startup Randori and Francisco Partners closed acquisition of IBM Watson Health Care data and analytics assets as part of the transaction reportedly worth over $1 billion.

IBM’s gross profit fell to 53.4% ​​from 55.2% in the year-ago quarter. The company said that competition in the labor market has weighed on the results of its consulting division, continuing a trend it saw earlier this year. The company is working to deal with this by charging higher contract rates and expects pre-tax annual margins of 9% to 10%, up more than 1 percentage point year on year.

“Consulting, which makes up more than half of IBM’s workforce, is the most affected by labor market inflation and rising labor costs as we increase capacity,” Kavanaugh said. “We are starting to incorporate the reality of these higher costs into our pricing, but given the time from signing a contract to earning revenue, it takes some time to see that in our margins.”

Prior to the post-hours postponement, IBM shares are up 3% this year, while the S&P 500 is down about 20%.

This story is evolving. Please stay tuned for updates.

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