Executive Summary
In Q2 2024, International Business Machines Corporation (IBM) delivered a robust performance with reported revenue of $15.8 billion, up 4% year-over-year at constant currency, and net income of $1.834 billion, translating into diluted earnings per share (EPS) of $1.96. Key drivers of growth included a notable 8% increase in the Software segment, propelled by advancements in AI and hybrid cloud solutions, alongside a 3% gain in Infrastructure revenue. However, the Consulting segment faced headwinds, with growth limited to 2% due to tighter discretionary spending. Management's commentary underlined a strong focus on AI integration, leading to confidence in maintaining sustainable growth despite near-term challenges in consulting.
Key Performance Indicators
Key Insights
**Revenue**: $15.8 billion, increasing 4% YoY
**Gross Profit**: $8.95 billion, with a gross margin of 56.8%, showing improvement from previous quarters
**Net Income**: $1.834 billion, or an increase of 15.9% YoY
**EPS**: $1.96 (diluted), reflecting a growth of 14.4% YoY
**Free Cash Flow**: $4.5 billion generated in H1 2024, up $1.1 billion year-over-year
**Operating Margin**: Expanded by 190 basis points to 24.1% driven by productivity initiatives and favorable product mix.
These results furthe...
Financial Highlights
Revenue: $15.8 billion, increasing 4% YoY
Gross Profit: $8.95 billion, with a gross margin of 56.8%, showing improvement from previous quarters
Net Income: $1.834 billion, or an increase of 15.9% YoY
EPS: $1.96 (diluted), reflecting a growth of 14.4% YoY
Free Cash Flow: $4.5 billion generated in H1 2024, up $1.1 billion year-over-year
Operating Margin: Expanded by 190 basis points to 24.1% driven by productivity initiatives and favorable product mix.
These results further illustrate IBM's resilience, with strong YoY comparisons in software and infrastructure performance despite consulting's tighter climate.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
15.77B |
1.90% |
9.05% |
| Gross Profit |
8.95B |
5.28% |
15.60% |
| Net Income |
1.83B |
15.86% |
14.27% |
| EPS |
1.99 |
14.37% |
13.71% |
Key Financial Ratios
operatingCashFlowPerShare
$2.24
freeCashFlowPerShare
$1.76
dividendPayoutRatio
83.8%
Management Commentary
AI Strategy and Performance: Arvind Krishna, CEO, noted, "Our investments in innovation are yielding results, driving strong organic growth across software and infrastructure. Technology spending remains robust, and we are confident in the positive macro outlook for technology spending."
Consulting Challenges: Jim Kavanaugh, CFO, remarked, "Consulting growth was affected by a pullback in discretionary spending. Signings for the quarter were $5.7 billion, demonstrating solid demand despite the challenges."
Future Outlook: Krishna emphasized, "Given our first-half performance, we are raising our expectations for free cash flow to greater than $12 billion for the year," showcasing confidence in continued growth.
"Our enterprise AI strategy is resonating as we evolve to meet client needs." - Arvind Krishna
â Arvind Krishna
"We delivered solid cash flow generation, the strongest first half level we have reported in many years." - Jim Kavanaugh
â Jim Kavanaugh
Forward Guidance
Looking ahead, IBM expects revenue growth to align with its mid-single-digit model through 2024. Free cash flow guidance has been raised to over $12 billion, indicating strong confidence in cash generation capabilities amid ongoing market pressures. The Software segment is anticipated to grow in the high-single-digit range, while Consulting growth is projected at low-single-digits, reflecting current trends in enterprise spending dynamics. With anticipated margin expansion across segments, IBM aims to leverage its hybrid cloud and AI strategy as pivotal growth drivers going forward. Monitoring macroeconomic conditions, particularly interest rates and client discretionary spending patterns, will be critical for investors.