IBM’s second-quarter net profit was $1.361 billion, down 45.5% year-on-year

IBM today reported its second-quarter results for fiscal 2020. According to the report, IBM’s second-quarter revenue was $18.123 billion, down 5.4 percent from $19.161 billion a year earlier, and net profit was $1.361 billion, down 45.5 percent from $2.498 billion a year earlier.

IBM's second-quarter net profit was $1.361 billion, down 45.5% year-on-year

Screenshot of IBM’s share price.

IBM opened at $126.07 on Monday, up $1.26, or 1.01 percent, at $126.37 by the close, and up $7.75, or 6.13 percent, at $134.10 at 16:18 EST on July 20. IBM’s share price has fluctuated over the past 52 weeks from $90.56 to $127.07.

IBM’s key second-quarter results.

Total revenue: IBM’s second-quarter total revenue was $18.123 billion, down 5.4% from $19.161 billion a year earlier, excluding divestitures and exchange rate movements, down 1.9% year-on-year;

Net profit: Net profit was $1.361 billion, down 45.5 percent from $2.498 billion a year earlier. Diluted earnings per share were $1.52, down 46 percent from $2.81 a year earlier. Profit from continuing operations was $1.362 billion, down 45.5 percent from $2.498 billion a year earlier.

Gross profit and gross margin: gross profit was $8.7 billion, down from $9.010 billion a year earlier, while gross margin was 48%, up 1 percentage point year-on-year;

Cost and expenses: IBM’s total operating expenses and other revenue in the second quarter were $7.129 billion, up from $6.242 billion a year earlier. Of these, sales, general and administrative expenditurewased at $5.248 billion, down from $5,456 million a year earlier, research and development and engineering expenditure was $1.582 billion, up from $1,407 million a year earlier, and intellectual property and customs development revenue was -2 $03 million, compared to $222 million a year earlier, while other income and expenditure were $179 million, compared with $747 million a year earlier, and interest expensewas was $323 million, compared with $348 million a year earlier.

Cash Flow and Balance Sheet: In the second quarter, IBM generated $3.6 billion in net cash from operating activities, excluding global financing receivables of $3 billion; IBM returned $1.5 billion to shareholders in the second quarter.

At the end of the second quarter, IBM held $14.3 billion in cash, including marketable securities, an increase of $5.2 billion from the end of 2019. Total debt, including $21.9 billion in globally financed debt, totalled $64.7 billion.

IBM's second-quarter net profit was $1.361 billion, down 45.5% year-on-year

By department.

IBM’s cloud and cognitive solutions division, which includes cloud and data platforms, including Red Hat, cognitive applications and transaction processing software, reported revenue of $5.7 billion, up 3 percent from a year earlier (up 5 percent after exchange rate factors), with cloud and data platform revenue up 29 percent (exchange-rate-adjusted growth of 30 percent), and revenue from cognitive applications and transaction processing platforms declining. Global business services, including consulting, application management and global process services, were $3.9 billion, down 7% year-on-year (down 6% after adjusting for exchange rate) and were mainly affected by the decline in application management and consulting. Cloud computing revenue grew by 12% (up 13% after adjusting for exchange rates). Gross margin rose by 240 basis points.

IBM’s global business services division, which includes consulting, application management and global process services, reported second-quarter revenue of $3.9 billion, down 7 percent year-on-year, excluding exchange rate movements, with revenue down 12 percent (exchange-rate adjusted growth) up 13 percent.

IBM’s technology services, which include data infrastructure services, cloud services, and technology support services, reported revenue of $6.3 billion, down 8% from a year earlier (excluding exchange rate movements down 5%). Among them, cloud computing revenue grew by 18% (exchange-rate adjusted growth of 20%).

IBM’s systems division, which includes its systems hardware and operating system software business, reported revenue of $1.9 billion, up 6% yoY, with IBM Z leading the way and revenue up 69% year-on-year (excluding exchange rate movements up 68% Year-over-year). Storage system revenue rose 2 percent (exchange-rate adjusted growth of 3 percent) ;P lower revenue in the business. Revenue from the cloud computing business grew 22%. Gross margin rose 430 basis points.

Revenue from IBM’s global finance division, which includes financing and second-hand equipment sales, was $265 million, down 25 percent year-on-year (excluding exchange rate movements) and reflected a decline in OEM commercial finance. Gross margin rose by 360 basis points.

Consolidated data for the first and second quarters of 2020.

Revenue: IBM consolidated revenue for the first and second quarters of 2020 was $35.694 billion, compared with $37.342 billion a year earlier, down 4% year-on-year (excluding a decrease in exchange rate movements down 1%).

Net profit: Consolidated net income was $2.538 billion, compared with $4,093 million a year earlier, down 38% year-on-year. Diluted earnings per share were $2.83, down 38 percent from $4.58 a year earlier.

Based on non-GAAP, diluted earnings per share were $4.02, compared with $5.42 per diluted share for the same period in 2019, down 26% year-on-year. Operating profit was $3.6 billion, down 26 percent from $4.8 billion a year earlier.