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Dec 31, 2020
IBM Q4 2020 Earnings Report
IBM's Q4 2020 earnings were impacted by a pre-tax charge for structural actions, but hybrid cloud adoption and gross margin expansion showed promise.
Key Takeaways
IBM reported a decrease in revenue and EPS for Q4 2020, impacted by a pre-tax charge of $2.04 billion for structural actions. However, the company saw growth in its hybrid cloud platform and an increase in gross profit margin.
GAAP EPS from continuing operations was $1.41; Operating (non-GAAP) EPS was $2.07, including the impact of a pre-tax charge for structural actions.
Revenue reached $20.4 billion, a decrease of 6 percent (down 8 percent adjusting for divested businesses and currency).
Total cloud revenue grew to $7.5 billion, up 10 percent (up 8 percent adjusting for divested businesses and currency).
GAAP gross profit margin increased by 70 basis points to 51.7 percent; Operating (non-GAAP) gross profit margin also increased by 70 basis points to 52.5 percent.
Forward Guidance
IBM expects to grow revenue for the full year 2021 based on the current foreign exchange rates. The company also expects adjusted free cash flow of $11 billion to $12 billion in 2021.
Positive Outlook
- Revenue growth expected for full year 2021.
- Adjusted free cash flow expected to be $11B-$12B in 2021.
- Focus on hybrid cloud and AI expected to drive revenue growth.
- Solid cash generation.
- Expanding gross profit margins.
Challenges Ahead
- Uncertainty of the macro environment.
- Impact of structural actions initiated in Q4 2020.
- Transaction costs associated with the separation of the managed infrastructure services business.
- Downturn in economic environment and client spending budgets.
Historical Earnings Impact
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Avg. Return Before/After Earnings
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