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IBM Beats Second-Quarter Earnings Forecast as Cloud Revenue Impresses

CEO Arvind Krishna says 'client adoption of our hybrid cloud platform contributed to strong performance in Global Business Services and software and drove improved overall revenue growth.'

International Business Machines  (IBM) - Get Report posted stronger-than-expected second-quarter earnings Monday as cloud revenue and operating margins improved.

IBM said non-GAAP earnings for the three months ending in June were pegged at $2.33 per share, up 6.9% from the same period last year and just ahead of the Street consensus forecast of $2.29. Group revenues, IBM said, rose 3.2% to $18.7 billion, again topping analysts' estimates of an $18.29 billion tally.  

Looking into the second half of the year, IBM held to its prior forecast of generating free cash flow in the region of $11 billion to $12 billion.

“In the second quarter client adoption of our hybrid cloud platform contributed to strong performance in Global Business Services and software and drove improved overall revenue growth," said CEO Arvind Krishna. "At the same time, we continued to help clients infuse our AI-based technology offerings into their core business workflow."

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"We are pleased with our progress and we remain on track to deliver full-year revenue growth and meet our cash flow objective,” he added.  

IBM shares were marked 2.8% higher in extended hours trading immediately following the earnings release to indicate a Tuesday opening bell price of $141.75 each, a move that would extend the stock's year-to-date gain to around 13%.

Cloud and cognitive software revenues rose 6.1% to $6.1 billion, IBM said, while the group's operating margin improved by 30 basis points to 49.3%. Normalized revenues from Red Hat, the cloud group IBM purchased for $34 billion in 2019, were up 20%.

Global Business Services revenues rose 11.6% to $4.3 billion, while systems sales fell 7.3% to $1.7 billion.