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IBM Continues Its Revenue Degrowth Story with Fiscal 2Q15 Results

Anne Shields

IBM’s Fiscal 2Q15 Results Shed Revenues for 13 Straight Quarters

2Q15 earnings overview

On July 21, 2015, IBM (IBM) announced its fiscal 2Q15 results. IBM reported revenues of $20.81 billion and non-GAAP (generally accepted accounting principles) earnings per share of $3.84. In the last 13 consecutive quarters, including fiscal 2Q15, IBM has posted a decline in its revenues. On a year-over-year basis, both revenues and EPS (earnings per share) fell by ~13% in 2Q15.

The company pointed to the strengthening US dollar (UUP) for the double-digit decline in its revenues. On a constant currency basis, its revenue declined by 1%. The strong dollar also impacted EMC’s (EMC) revenue growth in the last quarter, like it did for Microsoft (MSFT).

IBM’s revenue fell short of Zacks Investment Research analysts’ expectations, who were expecting revenues of $21.02 billion. However, IBM beat the analysts’ expectations on the EPS front, as the analysts expected IBM to post $3.80 in 2Q15.

IBM lowered its expectations for 3Q15, anticipating a decline of at least $1 billion in fiscal 3Q15 revenues compared with fiscal 2Q15 revenues. The absence of revenue growth in fiscal 2Q15, as well as lowered expectations for 3Q15, led to a fall in IBM’s stock by >5% after the results were announced. The above share price chart shows this movement.

Operating segment’s performance

In 2Q15, Global Technology Services (or GTS) and Global Business Services (or GBS) revenues stood at $8.1 billion and $4.3 billion, respectively. Both of these segments’ revenues reported a decline of 10% and 12%, respectively, on a year-over-year basis. IBM’s software sales fell by 10% to $5.8 billion. Its hardware business was the most impacted in fiscal 2Q15, with a 32% decline in its revenues. However, in constant currency terms and excluding its divested System X business, it rose by 9%.

You can consider investing in the iShares US Technology ETF (IYW) to gain exposure to IBM. IYW invests about 4.2% of its holdings in IBM.

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