ARMONK, NY, Jan. 18, 2018 — IBM (NYSE:IBM) today announced fourth-quarter and full-year 2017 earnings results.
“Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter,” said Ginni Rometty, IBM chairman, president and chief executive officer. “During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business. Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses.”
“Over the past several years we have invested aggressively in technology and our people to reposition IBM,” said James Kavanaugh, IBM senior vice president and chief financial officer. “2018 will be all about reinforcing IBM’s leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain.”
Strategic Imperatives Revenue
Fourth-quarter cloud revenues increased 30 percent to $5.5 billion (up 27 percent adjusting for currency). Cloud revenue over the last 12 months was $17.0 billion, including $9.3 billion delivered as-a-service and $7.8 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions. The annual exit run rate for as-a-service revenue increased to $10.3 billion from $8.6 billion in the fourth quarter of 2016. In the quarter, revenues from analytics increased 9 percent (up 6 percent adjusting for currency). Revenues from mobile increased 23 percent (up 21 percent adjusting for currency) and revenues from security increased 132 percent (up 127 percent adjusting for currency).
Full-Year 2018 Expectations
The company will discuss 2018 expectations during today’s quarterly earnings conference call.
Cash Flow and Balance Sheet
In the fourth quarter, the company generated net cash from operating activities of $5.7 billion, or $7.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.8 billion. IBM returned $1.4 billion in dividends and $0.7 billion of gross share repurchases to shareholders. At the end of December 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.
The company generated full-year free cash flow of $13.0 billion, excluding Global Financing receivables. The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion of gross share repurchases.
IBM ended the fourth quarter of 2017 with $12.6 billion of cash on hand. Debt totaled $46.8 billion, including Global Financing debt of $31.4 billion. The balance sheet remains strong and is well positioned over the long term.
Segment Results for Fourth Quarter
- Cognitive Solutions (includes solutions software and transaction processing software) — revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.
- Global Business Services (includes consulting, global process services and application management) —revenues of $4.2 billion, up 1 percent (down 2 percent adjusting for currency). Strategic imperatives revenue grew 9 percent led by the cloud practice, mobile and analytics.
- Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) — revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency). Strategic imperatives revenue grew 15 percent, driven by hybrid cloud services, security and mobile.
- Systems (includes systems hardware and operating systems software) — revenues of $3.3 billion, up 32 percent (up 28 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.
- Global Financing (includes financing and used equipment sales) — revenues of $450 million, up 1 percent (down 2 percent adjusting for currency).
The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a one-time charge of $5.5 billion in the fourth quarter. The charge encompasses several elements, including a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As a result, IBM’s reported GAAP tax rate, which includes the one-time charge, was 124 percent for the fourth quarter, and 49 percent for the full year. IBM’s operating (non-GAAP) tax rate, which excludes the one-time charge, was 6 percent for the fourth quarter; and 7 percent for the full year, which includes the effect of discrete tax benefits in the first and second quarters. Without discrete tax items, the full-year operating (non-GAAP) tax rate was 12 percent, at the low end of the company’s previously estimated range.
- Full-year GAAP EPS from continuing operations of $6.14– Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
- Full-year operating (non-GAAP) EPS of $13.80– Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform
- Full-year revenue of $79.1 billion, down 1 percent