Double-digit Software revenue growth; Free cash flow well-exceeds full-year expectation
ARMONK, N.Y., Jan. 29, 2025 /PRNewswire/ — IBM (NYSE: IBM) today announced fourth-quarter 2024 earnings results.
“We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red Hat. Clients globally continue to turn to IBM to transform with AI. Our generative AI book of business now stands at more than $5 billion inception-to-date, up nearly $2 billion quarter over quarter,” said Arvind Krishna, IBM chairman, president and chief executive officer. “Three years ago, we laid out a vision for a faster-growing, more-profitable IBM. I’m proud of the work the IBM team has done to meet or exceed our commitments. With our focused strategy, enhanced portfolio, and culture of innovation, we’re well-positioned for 2025 and beyond and expect revenue growth of at least five percent and free cash flow of about $13.5 billion this year.”
Fourth-Quarter Highlights
Full-Year Highlights
FOURTH–QUARTER 2024 INCOME STATEMENT SUMMARY
GAAP results include impact of one-time, non-cash pension settlement charge (1)
Revenue
Gross
Profit
Gross
Profit
Margin
Pre-tax
Income (1)
Pre-tax
Income
Margin (1)
Net
Income (1)
Diluted
Earnings
Per Share (1)
GAAP from
Continuing
Operations
$ 17.6 B
$ 10.4 B
59.5
%
$ 3.3 B
18.8
%
$ 2.9 B
$ 3.11
Year/Year
1
%(2)
2
%
0.4
Pts
(12)
%
-2.8
Pts
(11)
%
(12)
%
Operating
(Non-GAAP)
$ 10.6 B
60.6
%
$ 4.3 B
24.3
%
$ 3.7 B
$ 3.92
Year/Year
2
%
0.5
Pts
2
%
0.4
Pts
3
%
1
%
(1) 2024 GAAP results include the impact of a one-time, non-cash pension settlement charge of $0.4 billion related to the transfer of a
portion of the company’s Non-U.S. defined benefit pension obligations and related plan assets to third-party insurers in October 2024.
(2) 2% at constant currency.
“With strong performance across our Software portfolio, we continue to drive solid fundamentals within our business,” said James Kavanaugh, IBM senior vice president and chief financial officer. “As a result, we generated $12.7 billion in free cash flow, far-outpacing our expectation for the year. Continued strength in operating profitability and free cash flow fuels our ability to invest for the future while returning value to shareholders through dividends.”
Segment Results for Fourth Quarter
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $4.3 billion, down $0.1 billion year to year. IBM’s free cash flow was $6.2 billion, up $0.1 billion year to year. The company returned $1.5 billion to shareholders in dividends in the fourth quarter.
For the year, the company generated net cash from operating activities of $13.4 billion, down $0.5 billion year to year. Net cash from operating activities excluding IBM financing receivables was $13.9 billion, up $1.2 billion. IBM’s free cash flow was $12.7 billion, up $1.5 billion year to year.
IBM ended the fourth quarter with $14.8 billion of cash, restricted cash and marketable securities, up $1.3 billion from year-end 2023. Debt, including IBM Financing debt of $12.1 billion, totaled $55.0 billion, down $1.6 billion since year-end 2023.
Full-Year 2024 Results
FULL-YEAR 2024 INCOME STATEMENT SUMMARY
GAAP results include impacts of one-time, non-cash pension settlement charges (1)
Revenue
Gross
Profit
Gross
Profit
Margin
Pre-tax
Income (1)
Pre-tax
Income
Margin (1)
Net
Income (1)
Diluted
Earnings
Per Share (1)
GAAP from
Continuing
Operations
$ 62.8 B
$ 35.6 B
56.7
%
$ 5.8 B
9.2
%
$ 6.0 B
$ 6.42
Year/Year
1
%(2)
4
%
1.2
Pts
(33)
%
-4.8
Pts
(20)
%
(21)
%
Operating
(Non-GAAP)
$ 36.3 B
57.8
%
$ 11.2 B
17.9
%
$ 9.7 B
$ 10.33
Year/Year
4
%
1.3
Pts
9
%
1.2
Pts
9
%
7
%
(1) 2024 GAAP results include the impacts of one-time, non-cash, U.S. and non-U.S. pension settlement charges of $3.1 billion ($2.4 billion
net of tax).
(2) 3% at constant currency
Full-Year 2025 Expectations
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company’s innovation initiatives; damage to the company’s reputation; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company’s ability to successfully manage acquisitions, alliances and dispositions, including integration challenges, failure to achieve objectives, the assumption of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company’s failure to meet growth and productivity objectives; ineffective internal controls; the company’s use of accounting estimates; impairment of the company’s goodwill or amortizable intangible assets; the company’s ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; reliance on third-party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects related to climate change and environmental matters; tax matters; legal proceedings and investigatory risks; the company’s pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
Statements in this communication regarding the strategic acquisition that are forward-looking may include projections as to closing date for the transaction, the extent of, and the time necessary to obtain, the regulatory approvals required for the transaction, the anticipated benefits of the transaction, the impact of the transaction on IBM’s business, the synergies from the transaction, and the combined company’s future operating results.
Any forward-looking statement in this release speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Press Release
For generative AI, book of business includes Software transactional revenue, SaaS Annual Contract Value and Consulting signings. The generative AI book of business is further defined within Exhibit 99.2 in the Form 8-K that includes this press release.
In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information, which management believes provides useful information to investors:
IBM results —
The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.
Conference Call and Webcast
IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. ET, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q24. Presentation charts will be available shortly before the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
Contact: IBM
Sarah Meron, 347-891-1770
Tim Davidson, 914-844-7847
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three Months Ended
December 31,
Year Ended
December 31,
2024
2023 (1)
2024
2023 (1)
REVENUE BY SEGMENT
Software
$ 7,924
$ 7,179
$ 27,085
$ 25,011
Consulting
5,175
5,283
20,692
20,884
Infrastructure
4,256
4,604
14,020
14,593
Financing
170
175
713
741
Other
29
141
243
632
TOTAL REVENUE
17,553
17,381
62,753
61,860
GROSS PROFIT
10,439
10,267
35,551
34,300
GROSS PROFIT MARGIN
Software
85.0
%
84.1
%
83.7
%
82.9
%
Consulting
28.0
%
28.1
%
27.0
%
26.8
%
Infrastructure
56.9
%
60.8
%
55.8
%
56.1
%
Financing
46.9
%
50.2
%
47.9
%
48.1
%
TOTAL GROSS PROFIT MARGIN
59.5
%
59.1
%
56.7
%
55.4
%
EXPENSE AND OTHER INCOME
S,G&A
4,866
4,791
19,688
19,003
R,D&E
1,967
1,748
7,479
6,775
Intellectual property and custom development income
(301)
(242)
(996)
(860)
Other (income) and expense (2)
177
(193)
1,871
(914)
Interest expense
424
405
1,712
1,607
