IBM : Charts

3Q 2024 Earnings

October 23, 2024 ibm.com/investor

Arvind Krishna

Chairman, President and

Chief Executive Officer

James Kavanaugh

SVP, Finance & Operations

and Chief Financial Officer

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CEO perspective

"Our third-quarter performance was led by double-digit growth in Software, including a re-acceleration in Red Hat. We continue to see great momentum in AI as our models are trusted, fit-for-purpose, and lower cost, with performance leadership. Our generative AI book of business now stands at more than $3 billion, up more than $1 billion quarter to quarter.

Heading into the final quarter of 2024, we expect fourth quarter constant currency revenue growth to be consistent with the third quarter, with continued strength in Software. We are confident in our ability to deliver more than $12 billion in free cash flow for the year, driven by continued expansion of our operating margins."

Arvind Krishna

IBM Chairman, President and CEO

3Q24 Performance

Generative AI

Investments, innovation and clients

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Financial highlights

3Q24

$15.0B	$6.6B
Revenue	Free cash flow ytd

"Our investments are paying off in Software as we've repositioned our portfolio in recent years. In the third quarter, Software delivered broad-based growth and now represents nearly 45 percent of our total revenue. Our ongoing focus on product mix, coupled with our productivity initiatives enables us to continue to drive operating leverage in our underlying profit performance.

With our strong cash generation, we are well-positioned to continue investing for growth while returning value to shareholders through dividends."

James Kavanaugh

IBM SVP & CFO

2%	$1.5B
Revenue growth	Free cash flow ytd yr/yr
210bps	100bps
Gross margin expansion	Pre-tax margin expansion
(operating)	(operating)
8%	5%
Pre-tax income growth	Diluted EPS growth
(operating)	(operating)

Revenue growth rates @CC

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Software

Growth accelerated to 10% including 7 points of organic contribution

Red Hat revenue growth +14%, up 6 points sequentially

Solid and recurring revenue base;

ARR* of $14.9 billion, +11% yr/yr

Strong gross and segment profit margin expansion

$6.5B +10%

Revenue

Revenue growth

Revenue categories
Transaction	Hybrid Platform
Processing	& Solutions
+9% yr/yr	+10% yr/yr
	Red Hat	+14%
	Automation	+13%
	Data & AI	+5%
	Security	(1%)

3Q24 results; revenue growth rates @CC
*Annual recurring revenue for Hybrid Platform & Solutions, growth rate @CC	6

Consulting

Solid demand for large digital transformations

Book-to-bill ratio 1.14 for the last year

Continued momentum in generative AI bookings

Client reprioritization and spend constraints impacting revenue yield

$5.2B Flat

Revenue

Revenue growth

Revenue categories
Application	Business
Operations	Transformation
(1%) yr/yr	+2% yr/yr

Technology Consulting (4%) yr/yr

3Q24 results; revenue growth rates @CC

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Infrastructure

Infrastructure performance reflects product cycle dynamics

z16 continues to outpace prior programs

Ongoing investment in innovation

$3.0B (7%)

Revenue

Revenue growth

Revenue categories
Infrastructure	Hybrid
Support	Infrastructure
(3%) yr/yr	(9%) yr/yr
	IBM Z	(19%)
	Distributed
	Infrastructure	(3%)

3Q24 results; revenue growth rates @CC

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Summary

3Q24 Summary

Software accelerated to 10% growth, with Red Hat delivering 14% growth

Investments in innovation driving strong organic growth

Generative AI continues to gain traction; book of business greater than $3 billion inception to date

Operating leverage and productivity initiatives drove strong operating margin performance

Strong year-to-date free cash flow generation, +$1.5 billion ytd yr/yr

Expectations

Fourth quarter revenue growth @CC similar to third quarter

Raising full-year operating pre-tax margin expansion to about a point

Full-year free cash flow greater than $12 billion

Well positioned to deliver an upward inflection in growth in 2025

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