IBM improves gross margins in Q2 under new CEO

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SVP and Director at IBM Research Arvind Krishna speaks on stage during the 2016 Wired Business Conference in New York on June 16, 2016.

Brian Ach | Getty Images

IBM shares rose more than 6% in extended trading on Monday after the company reported second-quarter earnings that were better than analysts had expected.

Here’s how the company did:

  • Earnings: $2.18 per share, adjusted, vs. $2.07 per share as expected by analysts, according to Refinitiv.
  • Revenue: $18.12 billion, vs. $17.72 billion as expected by analysts, according to Refinitiv.

Adjusted earnings per share were down 31% on an annualized basis in the quarter, and revenue declined 5%, according to a statement. It’s the company’s second consecutive quarter of revenue decline as the coronavirus hit the company’s results.

The company’s net income, which came out to $1.36 billion, was down 46%. However, the company improved gross margins in three of its five units. IBM’s total gross profit margin was 48%, up from 45.1% in the first quarter and up from 47% in the year-ago quarter.

IBM did not update its full-year guidance. In April IBM withdrew its guidance for the full year because of the pandemic.

Revenue from IBM’s Global Technology Services category totaled $6.32 billion, down almost 8% year over year and above the FactSet consensus of $6.24 billion. 

IBM’s Cloud and Cognitive Software segment, which includes Red Hat, produced $5.75 billion in revenue. That’s up 3% and barely above than the $5.74 billion FactSet consensus.

The Global Business Services unit had $3.89 billion in revenue, which is down 7% and slightly higher than the $3.87 billion consensus.

In the quarter IBM announced cloud business from Movius and Prysmian Group, and it told the News & Observer newspaper in North Carolina that it was cutting a number of employees. And Arvind Krishna started his job as IBM’s CEO on April 6. 

Executives will discuss the results with analysts on a conference call starting at 5 p.m. Eastern time.

Excluding the after-hours move, IBM stock has fallen 5% so far this year. 

This is breaking news. Please check back for updates.

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