better than expected financial results second quarter, driven by strength in both software and services.
For the quarter, the enterprise tech giant reported revenue of $18.75 billion, up 3% from a year ago, and about $450 million higher than the Street consensus at $18.3 billion. Adjusted for currency and divestments, sales were about the same year-on-year.
The stock gained 3.2% to $142.60 in after-hours trading.
IBM (ticker: IBM) said non-GAAP earnings were $2.33 per share, four cents above the Street consensus of $2.29 per share, up 7% from a year ago. According to generally accepted accounting principles, the company earned $1.47 per share. On a non-GAAP basis, gross margin increased 0.3 percentage points to 49.3%, while pre-tax net income increased 0.7 points or 70 basis points to 13.5%.
Revenue in the company’s cloud and cognitive software segment was $6.1 billion, up 6.1%, or 2.5% in constant currency, and ahead of Street’s consensus forecast of $5.9 billion.
Global Business Services revenue was $4.3 billion, an increase of 11.6%, or 7.3% in constant currency, and ahead of the consensus estimate of $4.1 billion.
Global Technology Services, the company’s IT outsourcing arm, had revenue of $6.3 billion, up 0.4% but down 4.1% when adjusted for currency – a result slightly above expectations. Street lay. Systems revenue, including mainframes, declined 7.3%, or 10.2% when adjusted for currency.
IBM said total cloud revenue in the quarter was $7 billion, up 13% or 9% adjusted for currency, which was a slowdown from the first quarter, when the company posted 21% or 18% growth adjusted for currency. currency posted. Sales at Red Hat were up 20%, or 17% when adjusted for currency, accelerating from reported growth of 17% (15% adjusted for currency) in the March quarter.
IBM reiterated its earlier forecast for full-year adjusted free cash flow of $11 billion to $12 billion, excluding $3 billion in costs related to cost savings and the impending spin-off of the Kyndryl services.
“We built on our progress over the quarter,” IBM CFO Jim Kavanaugh said in an interview with Barron’s. “This is a sequel to that. Customers are adopting our hybrid cloud model.” He notes that IBM has paid off nearly $6.5 billion in debt in the first half and has now reduced its borrowings by $18 billion since it opened. completed the acquisition of Red Hat in July 2019.
Kavanaugh said the Kyndryl transaction is on track to close by the end of the year.
When asked about the environment for IT spending, Kavanaugh said conditions are “encouraging”. He said demand has improved in markets recovering from the pandemic, with sales growing in the last quarter in the US, Canada, UK, France, Italy and Spain. Kavanaugh cited ongoing challenges in some Asian markets, including India.
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