IBM Q2 results: ‘not a bad place to be building a position’

IBM Corporation (NYSE: IBM) on Monday reported market-beating results for its fiscal second quarter in the face of a strong dollar. Shares still slid 5.0% in after-hours trading.

Key takeaways from IBM Q2 results

Net income came in at $1.39 billion versus the year-ago figure of $1.32 billionPer-share earnings of $1.54 were up from $1.47 in the same quarter last yearOn an adjusted basis, EPS stood at $2.31 in the recent financial quarterRevenue jumped 9.0% YoY to $15.54 billion (adjusted for Kyndryl spinoff)FactSet consensus was for $2.26 of adjusted EPS on $15.08 billion in revenueGenerated free cash flow of $3.30 billion, as per the earnings press release

Other notable figures in the earnings report

Other notable figures in IBM Q2 results include a 6.4%, 9.8%, and 19% increase in software, consulting, and infrastructure revenues, respectively. Hybrid cloud revenue registered a 16% growth over the past twelve months, the multinational added.

Gross margin printed at 56.2%, slightly better than expected. IBM stock is down about 3.0% year-to-date.

Full year outlook and expert’s remarks

For the full year, IBM continues to see mid-single-digit increase in revenue. It now forecasts $10 billion in free cash flow versus up to $10.5 billion it had guided for earlier. The lowered figure reflects a $200 million hit from bailing on Russia, inflation, and “foreign exchange”.

In comparison, experts anticipate a 5.6% increase in full-year revenue. Reacting to the earnings report on CNBC’s “Closing Bell: Overtime”, Osterweis Capital Management’s Larry Cordisco said:

Overall, the earnings report looks really good. We have a lot of confidence in the fundamental turnaround in IBM; how they’re leveraging Red Hat, which is point of the spear for this company. It’s so cheap. There’s so much disbelief about the 3-to-5-year story that this is not a bad place to be building a position.

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