IBM share price volatile following Q2 results

IBM stock volatile following results release

While the International Business Machines (IBM) share price initially rallied to over US$130 per share, following the release of its Q2 results – the stock has since pulled back, last trading around US$126 per share.

This comes after the tech giant reported second quarter revenues of US$18.1 billion (-1.9%) against Non-GAAP earnings per share (EPS) of US$2.18. Impressively, the company’s gross profit margins increased by 160 basis points to 49.0%.

Those results represented beats on both analysts’ top and bottom-line expectations. Specifically, heading into the Q2 analysts were expecting IBM to report revenues of US$17.62 billion against EPS of US$2.12 per share, according to Bloomberg.

Cloud remains a standout

Though IBM’s revenue continues to decline, the company’s bet on cloud continues to gain traction, with Q2 cloud revenue increasing 30% to US$6.3 billion, while Red Hat revenue increased 17% during the quarter. For reference, over the last twelve months, the tech giant has recorded US$23.5 billion in cloud revenues.

Arvind Krishna, IBM’s Chief Executive, speaking of the catalysts behind this growth, posited that:

‘Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption.’

‘We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world,’ Mr Krishna finished.

IBM's Systems business segment also saw positive growth during the quarter: revenues rose 6% to US$1.9 billion, while margins expanded 430 basis points, to 57.8%.

In its presentation to the market, and speaking to the solid performance of Systems, said ‘IBM Z and Storage growth reflects client demand for resiliency and offering innovation.’

Mind you, while Cloud and Systems segments grew during the quarter, IBM’s other business arms all saw growth contract amid the global Covid-19 pandemic.

Specifically, Global Business Services recorded revenues of US$3.9 billion (-7%), Global Technology Services brought in revenues of US$6.3 billion (-8%), and IBM's Global Financing segment saw revenues drop 25%, a sharp decline which the company attributed to the 'wind-down of OEM commercial financing.'

The company currently has US$14.3 billion cash on hand, against debt of US$64.7 billion. In spite of that lofty debt position, management noted that ‘We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.’

The company made US$1.5 billion worth of dividend payments during the second quarter.

Looking forward, IBM said it has a ‘Strong second half pipeline,’ though noted that ‘results will be influenced by rate and pace of economic recovery.’

Want to take a position in IBM, long or short?

Create an IG trading account or log in to your existing account to get started now.