IBM 2019 Second-Quarter Results Reveal Growth in Software, Consulting and Cloud Revenue

IBM announced second-quarter 2019 results.

“In the second quarter, we continued to grow in the high-value areas of the business, led by a strong performance across our Cloud and Cognitive Software segment,” said Ginni Rometty, IBM chairman, president, and CEO. “With the completion of our acquisition of Red Hat, we will provide the only true open hybrid multi-cloud platform in the industry, strengthening our leadership position and uniquely helping clients succeed in chapter 2 of their digital reinventions.”

For the second quarter 2019, IBM said it had (GAAP from continuing operations) EPS of $2.81 and net income of $2.5 billion (up 4%).

Revenue for the quarter was $19.2 billion, down 4.2% (down 1.6% when adjusting for currency).  

Through the second quarter, the company said it is on track to achieve full-year 2019 EPS and free cash flow expectations, excluding the impact of the Red Hat acquisition.

IBM Segment Results for 2019 Q2:

For Cloud & Cognitive Software (including cloud and data platforms, cognitive applications and transaction processing platforms), there were revenues of $5.6 billion, up 3.2% (up 5.4 % adjusting for currency), with growth in cloud and data platforms, up 5% (up 7% adjusting for currency); cognitive applications, up 3% (up 5% adjusting for currency); and transaction processing platforms, up 2% (up 4% adjusting for currency).

For Global Business Services (including consulting, application management and global process services), there were revenues of $4.2 billion, up 0.5% (up 3.4% adjusting for currency), with strength led by growth in consulting, up 2% (up 5% adjusting for currency).

In Global Technology Services (includes infrastructure and cloud services and technology support services), there were revenues of $6.8 billion, down 6.7% (down 3.5% adjusting for currency). Gross profit margin increased 120 basis points, the company said.

For Systems (including systems hardware and operating systems software) there were revenues of $1.8 billion, down 19.5% (down 18.0 % adjusting for currency), with growth in Power, more than offset by the impact of “product cycle dynamics” in IBM Z and Storage, IBM said.

And, in Global Financing (including financing and used equipment sales), there were revenues of $351 million, down 11.0% (down 8.5 % adjusting for currency), which reflected the wind-down of OEM commercial financing.

“We maintained our momentum in the second quarter, again expanding gross profit margin and growing free cash flow, driven to a great extent by our increasing mix of high-value offerings for clients,” said James Kavanaugh, IBM senior vice president and chief financial officer.  “On August 2, we will discuss how the acquisition of Red Hat will accelerate IBM's revenue growth, contribute to our high-value model and enhance our free cash flow generation going forward.”

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