News Hub

IBM first quarter results buoyed by Red Hat wave

Written by Tue 21 Apr 2020

IBM weathered Covid-19 storm through March, though company withdraws 2020 projections

IBM has become one of the first technology giants to release its quarterly financials as the world prepares to gauge how Covid-19 has impacted the bottom lines of major technology players.

Despite swathes of the economy being in apparent free-fall right now, IBM so far appears to have been largely resilient to the global economic shock induced by the pandemic, posting growth in cloud, hardware and Red Hat related earnings.

In the quarterly earnings call, Arvind Krishna, appointed CEO in January this year, even suggested that IBM had its eyes on further acquisitions, following the company’s record-breaking $34 billion purchase of Red Hat in 2018.

Big Blue’s total revenue for the quarter came in at  $17.6 billion, a 3.4 percent drop compared to Q4 2019, although IBM said total revenues were 0.1 percent up, adjusted for divested businesses and currency.

It is typical for large companies to tie these stats into yearly projections, but IBM has decided to withdraw its 2020 guidance due to the current Covid-19 crisis. This is not incredibly surprising, as such predictions are based on macro-economic indicators that are volatile and hard to predict right now.

When IBM released its Q4 2019 results, all the signs suggested that its Red Hat acquisition was paying dividends. This quarter’s results tell a similar story. IBM’s Cloud & Cognitive Software segment netted revenues of $5.2 billion, a 5 percent rise. Within this segment sits Cloud & Data Platforms, which itself includes Red Hat, which grew by 32 percent in the quarter.

“IBM remains focused on helping our clients adapt to the immediate challenges of the COVID-19 pandemic, while we continue to enable them to shift their mission-critical workloads to hybrid cloud and expand their use of AI to help transform their operations,” said Arvind Krishna, IBM chief executive officer.

“Our first-quarter performance in cloud is a reflection of the trust clients place in IBM’s technology and expertise today, and positions us to continue building an enduring hybrid cloud platform for the future.”

The results of IBM’s other business segments were as follows:

  • Global Business Services (includes Consulting, Application Management and Global Process Services)  revenues of $4.1 billion, flat year-to-year (up 1 percent adjusting for currency), with growth in Consulting, up 4 percent (up 5 percent adjusting for currency); gross profit margin up 100 basis points.
  • Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.5 billion, down 6 percent (down 4 percent adjusting for currency); gross profit margin up 30 basis points.
  • Systems (includes Systems Hardware and Operating Systems Software) revenues of $1.4 billion, up 3 percent (up 4 percent adjusting for currency), led by IBM Z, up 59 percent (up 61 percent adjusting for currency) and Storage Systems revenue up 18 percent (up 19 percent adjusting for currency); gross profit margin up 410 basis points.
  • Global Financing (includes financing and used equipment sales) revenues of $299 million, down 26 percent (down 25 percent adjusting for currency); revenue reflects the wind-down of OEM commercial financing; gross profit margin up 580 basis points.

Written by Tue 21 Apr 2020


financials ibm. red hat
Send us a correction Send us a news tip