Here’s how the company did it:
- Earnings: $ 1.84 per share, adjusted
- Revenue: $ 17.57 billion
Analysts polled by Refinitiv expected earnings per share of $ 1.80, adjusted, on revenues of $ 17.62 billion for the first quarter. Comparing IBM’s results with analysts’ estimates is not easy, however, as the coronavirus affected economies around the world during the quarter.
IBM withdrew its directives for the entire year in the context of Covid-19, according to a statement. IBM’s forecast for 2020 was at least $ 13.35 per share adjusted earnings on a quarterly basis. Analysts were looking for earnings per share of $ 11.73 on an adjusted basis, according to Refinitiv. Three months ago, the company also called for revenue growth, adjusted earnings and free cash flow for 2020, as well as higher gross operating margin.
Net earnings for the quarter totaled $ 1.18 billion for the quarter, down 26% year-over-year. Revenues fell 3.4% on an annualized basis in the first quarter as the company faced the spread of the coronavirus and directed employees to work remotely. One quarter ago, the company ended a streak of five consecutive quarters of declining revenues.
The IBM Global Technology Services segment, which includes infrastructure and cloud services and technology support services, recorded revenues of $ 6.47 billion, down 5.9% year-on-year. the other. It came below the $ 6.51 billion consensus among analysts polled by FactSet.
The company’s cloud and cognitive software segment, which includes transaction processing platforms, cognitive applications, and cloud and data platforms like Red Hat, generated $ 5.24 billion in revenue. It was up 5.5% and lower than the FactSet consensus estimate of $ 5.30 billion. Red Hat’s revenue increased 18% on a normalized basis.
Global Business Services, the consulting, application management and process services segment, generated $ 4.14 billion in revenues, down 0.5% year-over-year. The result beat the FactSet consensus by $ 3.91 billion.
Systems revenues from hardware and operating systems totaled $ 1.37 billion. That number was up 3% and below the FactSet consensus of $ 1.42 billion. The Z line of mainframe computers within Systems increased 59% as sales of the mainframe z15 continued.
Earlier this month, Arvind Krishna, who has worked at IBM since 1990, took over the company as CEO, replacing Ginni Rometty. Krishna, who was previously in charge of the cloud at IBM, suggested in an interview with CNBC as he began his new role that Covid-19 could accelerate adoption by customers of cloud services.
During the quarter, IBM announced a 10-year service agreement with Banco Sabadell, in Spain, which includes a hybrid cloud component.
David Holt, an analyst at CFRA Research, lowered his target price on IBM stocks to $ 144, against $ 165 in a note distributed to customers Monday.
“At current levels, we believe the stocks have sufficiently discounted the future setbacks of Covid-19, especially when you consider IBM’s poor revenue base,” wrote Holt, who maintained his purchase note on IBM stocks. “Curiously, the current backdrop could work in favor of IBM, as we believe the company could see a smaller downgrade than most under our cover, which would allow fundamentals to more easily exceed current expectations , especially with the level of healthy fear currently embedded in the market. “
Excluding activity after the publication of the income statement, IBM shares are down about 10% since the start of the year.
Leaders will discuss the quarterly results in a conference call starting at 5 p.m. Eastern time.
These are the latest news. Please check back for updates.
WATCH: CNBC full interview with new IBM CEO Arvind Krishna