Why IBM’s Revenues Are Missing the Mark in Q1

By Chris Lange Updated Jan 30, 9:59PM EST · Published Apr 16, 4:13PM EDT

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International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) reported fourth-quarter financial results after markets closed Tuesday. Big Blue said that it had $2.25 in earnings per share (EPS) and $18.2 billion in revenue, compared with consensus estimates that called for $2.22 in EPS and $18.51 billion in revenue. The same period of last year reportedly had EPS of $2.45 in EPS and revenue of $19.07 billion.

In terms of its segments, IBM reported:

Cloud & Cognitive Software (includes cloud and data platforms, cognitive applications and transaction processing platforms) — revenues of $5.0 billion, down 2% (up 2% adjusting for currency), led by cognitive applications, up 2% (up 4% adjusting for currency), and by cloud and data platforms, down 2% (up 2% adjusting for currency).

Global Business Services (includes consulting, application management and global process services) — revenues of $4.1 billion, flat year to year (up 4% adjusting for currency), with growth in consulting and global process services. Gross profit margin increased 280 basis points.

Global Technology Services (includes infrastructure and cloud services and technology support services) — revenues of $6.9 billion, down 7% (down 3% adjusting for currency), with growth in hybrid cloud revenue. Gross profit margin increased 110 basis points.

Systems (includes systems hardware and operating systems software) — revenues of $1.3 billion, down 11% (down 9% adjusting for currency), with growth in Power, offset by the impact of the IBM Z product cycle dynamics and weakness in Storage.

Global Financing (includes financing and used equipment sales) — revenues of $406 million, flat year to year (up 4% adjusting for currency).

Looking ahead to the 2019 fiscal year, the company expects to see EPS of $13.90 and free cash flow of roughly $12 billion. The consensus estimates call for $13.91 in EPS and $78.04 billion in revenue.

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Ginni Rometty, IBM’s board chair, president and CEO, commented:

In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting. IBM’s investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention.

Shares of IBM closed Tuesday at $145.11, with a consensus analyst price target of $143.72 and a 52-week trading range of $105.94 to $162.00. Following the announcement, the stock was down about 3% at $141.00 in the after-hours trading session.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.