Technology
GODADDY REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2023 RESULTS
Published
2 years agoon
By
Q4 2023 Applications & Commerce revenue up 13%;
Delivered Q4 net income margin of 103%, inclusive of non-routine items, and Q4 Normalized EBITDA margin of over 29%
Cash Provided by Operating Activities up 43% in Q4; Free Cash Flow up 51% in Q4
TEMPE, Ariz., Feb. 13, 2024 /PRNewswire/ — GoDaddy Inc. (NYSE: GDDY) today reported financial results for the fourth quarter and full year that ended December 31, 2023.
“GoDaddy demonstrated strong operational execution and financial performance while also making significant progress in our mission of empowering entrepreneurs around the world,” said GoDaddy CEO Aman Bhutani. “We are excited and confident in our ability to deliver compelling solutions for our customers across our simplified software platform while continuing to strengthen our strategic positioning.”
“GoDaddy delivered strong 2023 financial results, showcasing our ability to provide a one-stop shop for our customers and drive margin expansion through operational discipline,” said GoDaddy CFO Mark McCaffrey. “We remain committed to managing our business to provide an optimal combination of top-line growth and profitability, delivering compounding free cash flow and creating enduring shareholder value.”
Full Year 2023 Business Highlights
Total revenue of $4.3 billion, up 4% year-over-year, and 5% on a constant currency basis.Total bookings of $4.6 billion, up 4% year-over-year, and 5% on a constant currency basis.Net Income of $1.4 billion, inclusive of non-routine items, up 295% year-over-year, representing a 33% margin.Normalized EBITDA (NEBITDA) of $1.1 billion, up 12% year-over-year, representing a 27% margin.Net cash provided by operating activities of $1,047.6 million, up 7% year-over-year.Free cash flow of $1.1 billion, up 12% year-over-year.On January 1, 2024, GoDaddy’s subsidiary holding company, Desert Newco, LLC, was converted from a partnership to a disregarded entity for U.S. income tax purposes, thereby terminating its legacy Up-C structure.
Fourth Quarter 2023 Business Highlights
Total revenue of $1.1 billion, up 6% year-over-year on a reported and constant currency basis.Total bookings of $1.1 billion, up 7% year-over-year, and 6% on a constant currency basis.Net income of $1.1 billion, inclusive of non-routine items, up 1,107% year-over-year, representing a 103% margin.NEBITDA of $324.2 million, up 22% year-over-year, representing a 29% margin.Net cash provided by operating activities of $297.7 million, up 43% year-over-year.Free cash flow of $305.1 million, up 51% year-over-year.Gross payments volume, or GPV, from GoDaddy’s commerce offerings grew to an impressive $1.7 billion, up 125% year-over-year. Gross merchandise volume was $36 billion, up 26% year-over-year.GoDaddy launched its AI experience, GoDaddy AiroTM, within the U.S. GoDaddy AiroTM harnesses the power of generative AI and other machine learning to proactively help build and grow online ventures, delivering a business-in-a-box experience that automatically generates a logo, website, tailored content, communications, and more. Customers engage with it within minutes of registering a domain or can use other features if they have an established website.
Consolidated Fourth Quarter and Full Year Financial Highlights
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
Change
Constant
Currency
2023
2022
Change
Constant
Currency
(in millions, except customers in thousands and ARPU in dollars)
GAAP Results
Total revenue
$ 1,100.3
$ 1,039.9
5.8 %
5.8 %
$ 4,254.1
$ 4,091.3
4.0 %
4.6 %
Applications & commerce revenue
$ 377.4
$ 333.4
13.2 %
$ 1,430.4
$ 1,279.7
11.8 %
Core platform revenue
$ 722.9
$ 706.5
2.3 %
$ 2,823.7
$ 2,811.6
0.4 %
International revenue
$ 353.9
$ 340.8
3.8 %
3.8 %
$ 1,381.1
$ 1,334.0
3.5 %
5.3 %
Net income(1)
$ 1,132.3
$ 93.8
1,107.1 %
$ 1,393.8
$ 352.9
295.0 %
Net cash provided by operating
activities
$ 297.7
$ 208.0
43.1 %
$ 1,047.6
$ 979.7
6.9 %
Segment EBITDA – A&C
$ 164.8
$ 135.6
21.5 %
$ 594.2
$ 522.8
13.7 %
Segment EBITDA margin – A&C
43.7 %
40.7 %
300 bps
41.5 %
40.9 %
70 bps
Segment EBITDA – Core
$ 227.8
$ 204.8
11.2 %
$ 816.4
$ 783.7
4.2 %
Segment EBITDA margin – Core
31.5 %
29.0 %
250 bps
28.9 %
27.9 %
100 bps
Non-GAAP Results(2)
Normalized EBITDA (NEBITDA)
$ 324.2
$ 266.0
21.9 %
$ 1,134.5
$ 1,013.0
12.0 %
NEBITDA margin
29.5 %
25.6 %
390 bps
26.7 %
24.8 %
190 bps
Unlevered free cash flow
$ 346.6
$ 238.2
45.5 %
$ 1,254.2
$ 1,095.9
14.4 %
Free cash flow
$ 305.1
$ 201.6
51.3 %
$ 1,084.4
$ 968.6
12.0 %
Operating and Business Metrics
Total bookings
$ 1,123.9
$ 1,051.6
6.9 %
6.5 %
$ 4,603.1
$ 4,413.8
4.3 %
4.7 %
Total customers at period end
21,026
20,897
0.6 %
21,026
20,897
0.6 %
Average revenue per user (ARPU)
$ 203
$ 197
3.0 %
$ 203
$ 197
3.0 %
Annualized Recurring Revenue
(ARR)
$ 3,690.8
$ 3,570.1
3.4 %
$ 3,690.8
$ 3,570.1
3.4 %
_______________________________
(1) Net income for the three months and the year ended December 31, 2023 includes $11.2 million and $90.8 million, respectively, in restructuring and other charges. In addition, during the fourth quarter of 2023, we released the majority of our valuation allowance on U.S. and state deferred tax assets, resulting in a non-routine non-cash benefit of approximately $1 billion recorded to income taxes.
(2) Reconciliations of our non-GAAP results to their most directly comparable GAAP financial measures are set forth in “Reconciliation of Non-GAAP Financial Measures” below.
Share Repurchases
From January 1, 2022 through February 1, 2024, GoDaddy repurchased 34.2 million shares of its common stock for an aggregate purchase price of $2.6 billion, and an average price per share of $74.99. These repurchases represent a reduction of approximately 20% in fully diluted shares from those outstanding as of December 31, 2021.
Balance Sheet
At December 31, 2023, total cash and cash equivalents and short-term investments were $498.8 million, total debt was $3.9 billion and net debt was $3.4 billion.
Debt Repricing
In January 2024, GoDaddy repriced $1.8 billion of the outstanding principal amount of its term loans to lower the interest rate margins by 0.5%. This strategic adjustment and the repricing we completed in July 2023 are expected to reduce annual cash interest expense by approximately $22.0 million. The refinanced loans retain the original maturity date and other terms and conditions.
Partial Release of Valuation Allowance
During the fourth quarter, as a result of our increasing profitability over the past several years and forecasted levels of future taxable income, we released the majority of our valuation allowance on our U.S. and state deferred tax assets. This resulted in a non-cash benefit of approximately $1 billion recorded to income taxes.
Business Outlook
For the first quarter ending March 31, 2024, GoDaddy expects total revenue in the range of $1.085 billion to $1.105 billion, representing year-over-year growth of 6% at the midpoint, versus the same period in 2023. For the full year ending December 31, 2024, GoDaddy is targeting total revenue in the range of $4.480 billion to $4.560 billion, representing year-over-year growth of 6% at the midpoint, versus the $4.25 billion of revenue generated for the full year ended December 31, 2023.
For the first quarter ending March 31, 2024, GoDaddy expects Normalized EBITDA margin of 27%. For the full year ending December 31, 2024, GoDaddy expects Normalized EBITDA margin of approximately 29%, with a fourth quarter Normalized EBITDA margin of approximately 31%.
For the full year ending December 31, 2024, GoDaddy expects unlevered free cash flow of at least $1.4 billion, versus the $1.3 billion of unlevered free cash flow generated in 2023. GoDaddy expects free cash flow of at least $1.2 billion, versus the $1.1 billion of free cash flow generated in 2023.
Modeling Guide
2024
Capital expenditures
~ $35 million
Cash interest on long-term debt
~ $155 million
Cash income taxes
~ $30 million
GoDaddy’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). GoDaddy does not provide reconciliations from non-GAAP guidance to GAAP equivalents because projections of changes in individual balance sheet amounts are not possible without unreasonable effort, and presentation of such reconciliations would imply an inappropriate degree of precision. GoDaddy provided reconciliations of non-GAAP financial measures to their nearest GAAP equivalents in the tables included within this release.
Upcoming Investor Events
GoDaddy will hold an in-person Investor Day on March 6, 2024 at its Tempe, Arizona headquarters during which leaders will discuss GoDaddy’s long-term strategy, innovation initiatives, financial framework, and capital allocation strategy, as well as provide demonstrations of recently launched customer experiences. Given limited space for the live event, interested shareholders and analysts are encouraged to email investors@godaddy.com for an invitation. The event, along with supporting materials, will be accessible live or via an archived replay through the Investor Relations section of GoDaddy’s website at https://investors.godaddy.net.
Quarterly Earnings Webcast
GoDaddy will host a webcast to discuss fourth quarter and full year 2023 results at 5:00 p.m. Eastern Time on February 13, 2024. To participate in the webcast, please preregister online at https://investors.godaddy.net/investor-relations/overview/default.aspx. A live webcast of the event, together with a slide presentation including supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, will be available through GoDaddy’s Investor Relations website at https://investors.godaddy.net. A transcript of prerecorded remarks will be available on the Investor Relations website at the time of the webcast. Following the event, a recorded replay of the webcast will be available on the website.
GoDaddy uses its Investor Relations website at https://investors.godaddy.net as a means of disclosing material non-public information and to comply with its disclosure obligations under Regulation FD. Accordingly, investors should monitor GoDaddy’s Investor Relations website, in addition to following press releases, Securities and Exchange Commission (SEC) filings, public conference calls and webcasts.
Forward-Looking Statements
This press release contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. Statements in this press release involve risks, uncertainties and assumptions. If the risks or uncertainties materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to any statements regarding: our business outlook; launches of new or expansion of existing products or services, including GoDaddy AiroTM, any projections of product or service availability, technology developments and innovation, customer growth, or other future events; historical results that may suggest future trends for our business; our plans, strategies or objectives with respect to future operations, partnerships and partner integrations and marketing strategy; future financial results; our ability to integrate acquisitions and achieve desired synergies and vertical integration; the expected impact of our debt repricing; our forecasted levels of future taxable income; and assumptions underlying any of the foregoing.
Actual results could differ materially from our current expectations as a result of many factors, including, but not limited to: the unpredictable nature of our rapidly evolving market; fluctuations in our financial and operating results; our rate of growth; interruptions or delays in our service or our web hosting; our dependence on payment card networks and acquiring processors; breaches of our security measures; the impact of any previous or future acquisitions or divestitures; our ability to continue to release, and gain customer acceptance of, our existing and future products and services; our ability to deploy new and evolving technologies, such as artificial intelligence, machine learning, data analytics and similar tools, in our offerings; our ability to manage our growth; our ability to hire, retain and motivate employees; the effects of competition; technological, regulatory and legal developments; intellectual property litigation; the impact of our restructuring efforts; macroeconomic conditions and developments in the economy, financial markets and credit markets; continued escalation of geopolitical tensions; the level of interest rates and inflationary pressures; and execution of share repurchases.
Additional risks and uncertainties that could affect GoDaddy’s business and financial results are included in the filings we make with the SEC from time to time, including those described in “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, each of which are available on GoDaddy’s website at https://investors.godaddy.net and on the SEC’s website at www.sec.gov, and any subsequent quarterly or annual report filed with the SEC thereafter, including our annual report on Form 10-K for the year ended December 31, 2023. Additional information will also be set forth in other filings that GoDaddy makes with the SEC from time to time. All forward-looking statements in this press release are based on information available to GoDaddy as of the date hereof. Except to the extent required by law, GoDaddy does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Non-GAAP Financial Measures and Other Operating and Business Metrics
In addition to our financial results prepared in accordance with GAAP, this press release includes certain non-GAAP financial measures and other operating and business metrics. We believe that these non-GAAP financial measures and other operating and business metrics are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. The non-GAAP financial measures included in this press release should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, similarly titled measures may be calculated differently by other companies and may not be comparable. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent is included in this press release following the financial statements. We use both GAAP and non-GAAP measures to evaluate and manage our operations.
Total bookings. Total bookings is an operating metric representing the total value of customer contracts entered into during the period, excluding refunds. We believe total bookings provides additional insight into the performance of our business and the effectiveness of our marketing efforts since we typically collect payment at the inception of a customer contract but recognize revenue ratably over the term of the contract.
Constant currency. Constant currency is calculated by translating bookings and revenue for each month in the current period using the foreign currency exchange rates for the corresponding month in the prior period, excluding any hedging gains or losses realized during the period. We believe constant currency information is useful in analyzing underlying trends in our business by eliminating the impact of fluctuations in foreign currency exchange rates and allows for period-to-period comparisons of our performance.
Normalized EBITDA (NEBITDA). NEBITDA is a supplemental measure of our operating performance used by management and investors to evaluate our business. We calculate NEBITDA as net income excluding depreciation and amortization, interest expense (net), provision or benefit for income taxes, equity-based compensation expense, acquisition-related costs, restructuring-related expenses and certain other items. We believe that the inclusion or exclusion of certain recurring and non-recurring items provides a supplementary measure of our core operating results and permits useful alternative period-over-period comparisons of our operations but should not be viewed as a substitute for comparable GAAP measures.
NEBITDA margin. NEBITDA margin is used by management as a supplemental measure of our operating performance and refers to the ratio of NEBITDA to revenue, expressed as a percentage.
Unlevered free cash flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate our business prior to the impact of our capital structure and restructuring and after purchases of property and equipment. Such liquidity can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.
Free cash flow. Free cash flow is defined as our unlevered free cash flow less interest payments for the period. We use free cash flow as a supplemental measure of our liquidity, including our ability to generate cash flow in excess of capital requirements and return cash to shareholders, though it should not be considered as an alternative to, or more meaningful than, comparable GAAP measures.
Net debt. We define net debt as total debt less cash and cash equivalents and short-term investments. Total debt consists of the current portion of long-term debt plus long-term debt and unamortized original issue discount and debt issuance costs. Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage and we believe such information is useful to investors. Furthermore, certain analysts and debt rating agencies monitor our net debt as part of their assessments of our business.
Gross merchandise volume (GMV). GMV is a business metric calculated by annualizing the total quarterly dollar value of orders facilitated by our customers through our Commerce platform, including shipping and handling, and taxes, and is shown net of discounts, and returns (where visibility exists). While GMV is not indicative of our performance, we believe it is an indicator of the strengths of our products and platforms.
Gross payments volume (GPV). GPV is an operating metric calculated by annualizing the total quarterly dollar value of transactions processed through our payments platform. GPV is representative of the volume of transactions in which we record transaction revenue based on our payment processing rate.
Annualized recurring revenue (ARR). ARR is an operating metric defined as quarterly recurring revenue (QRR) multiplied by four. QRR represents the quarterly recurring GAAP revenue, net of refunds, from new and renewed subscription-based services. ARR is exclusive of any revenue that is non-recurring, including, without limitation, domain aftermarket, domain transfers, one-time set-up or migration fees and non-recurring professional website services fees. We believe ARR helps illustrate the scale of certain of our products and facilitates comparisons to other companies in our industry.
Average revenue per user (ARPU). We calculate ARPU as total revenue during the preceding 12 month period divided by the average of the number of total customers at the beginning and end of the period. ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers.
Total customers. We define a customer as an individual or entity with paid transactions in the trailing twelve months or with paid subscriptions as of the end of the period. A single user may be counted as a customer more than once if they maintain paid subscriptions or transactions in multiple accounts. Total customers is one way we measure the scale of our business and is an important part of our ability to increase our revenue base.
About GoDaddy
GoDaddy helps millions of entrepreneurs globally start, grow, and scale their businesses. People come to GoDaddy to name their idea, build a professional website, attract customers, sell their products and services, and accept payments online and in-person. GoDaddy’s easy-to-use tools help microbusiness owners manage everything in one place and its expert guides are available to provide assistance 24/7. To learn more about the company, visit www.GoDaddy.com.
GoDaddy Inc.
Consolidated Statements of Operations (unaudited)
(In millions, except shares in thousands and per share amounts)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Revenue:
Applications & commerce
$ 377.4
$ 333.4
$ 1,430.4
$ 1,279.7
Core platform
722.9
706.5
2,823.7
2,811.6
Total revenue
1,100.3
1,039.9
4,254.1
4,091.3
Costs and operating expenses(1):
Cost of revenue (excluding depreciation and amortization)
402.2
379.5
1,573.6
1,484.5
Technology and development
203.8
206.3
839.6
794.0
Marketing and advertising
84.6
94.9
352.9
412.3
Customer care
74.3
75.3
304.5
305.9
General and administrative
95.6
98.6
374.0
385.5
Restructuring and other
11.2
0.9
90.8
15.7
Depreciation and amortization
38.7
49.5
171.3
194.6
Total costs and operating expenses
910.4
905.0
3,706.7
3,592.5
Operating income
189.9
134.9
547.4
498.8
Interest expense
(43.6)
(42.2)
(179.0)
(146.3)
Loss on debt extinguishment
—
(3.6)
(1.5)
(3.6)
Other income (expense), net
1.2
6.8
36.9
7.6
Income before income taxes
147.5
95.9
403.8
356.5
Benefit (provision) for income taxes
984.8
(2.1)
990.0
(3.6)
Net income
1,132.3
93.8
1,393.8
352.9
Less: net income attributable to non-controlling interests
0.2
0.2
0.8
0.7
Net income attributable to GoDaddy Inc.
$ 1,132.1
$ 93.6
$ 1,393.0
$ 352.2
Net income attributable to GoDaddy Inc. per share of Class A common
stock:
Basic
$ 8.01
$ 0.60
$ 9.39
$ 2.22
Diluted
$ 7.85
$ 0.60
$ 9.20
$ 2.19
Weighted-average shares of Class A common stock outstanding:
Basic
141,418
154,745
148,296
158,788
Diluted
144,253
157,083
151,452
161,457
____________________________________
(1) Costs and operating expenses include equity-based compensation expense as follows:
Cost of revenue
$ 0.2
$ 0.4
$ 1.3
$ 1.5
Technology and development
39.2
37.9
162.4
140.3
Marketing and advertising
6.9
7.4
27.9
29.1
Customer care
6.1
5.4
24.1
20.0
General and administrative
16.3
20.0
78.3
73.5
Restructuring and other
—
—
2.3
—
Total equity-based compensation expense
$ 68.7
$ 71.1
$ 296.3
$ 264.4
GoDaddy Inc.
Consolidated Balance Sheets (unaudited)
(In millions, except per share amounts)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$ 458.8
$ 774.0
Short-term investments
40.0
—
Accounts and other receivables
76.6
60.1
Registry deposits
37.3
41.0
Prepaid domain name registry fees
466.0
435.7
Prepaid expenses and other current assets
177.2
271.8
Total current assets
1,255.9
1,582.6
Property and equipment, net
185.3
225.6
Operating lease assets
60.8
84.1
Prepaid domain name registry fees, net of current portion
209.0
197.1
Goodwill
3,569.3
3,536.9
Intangible assets, net
1,158.6
1,252.2
Deferred tax assets
1,038.8
—
Other assets
105.6
95.0
Total assets
$ 7,583.3
$ 6,973.5
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
$ 148.1
$ 130.9
Accrued expenses and other current liabilities
442.4
356.7
Deferred revenue
2,074.9
1,954.0
Long-term debt
17.9
18.2
Total current liabilities
2,683.3
2,459.8
Deferred revenue, net of current portion
802.4
770.3
Long-term debt, net of current portion
3,798.5
3,812.9
Operating lease liabilities, net of current portion
90.2
116.5
Other long-term liabilities
90.7
87.1
Deferred tax liabilities
37.8
56.2
Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value
—
—
Class A common stock, $0.001 par value
0.1
0.2
Class B common stock, $0.001 par value
—
—
Additional paid-in capital
2,271.6
1,912.6
Accumulated deficit
(2,302.5)
(2,422.6)
Accumulated other comprehensive income
111.2
178.0
Total stockholders’ equity (deficit) attributable to GoDaddy Inc.
80.4
(331.8)
Non-controlling interests
—
2.5
Total stockholders’ equity (deficit)
80.4
(329.3)
Total liabilities and stockholders’ equity (deficit)
$ 7,583.3
$ 6,973.5
GoDaddy Inc.
Consolidated Statements of Cash Flows (unaudited)
(In millions)
Year Ended
December 31,
2023
2022
Operating activities
Net income
$ 1,393.8
$ 352.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
171.3
194.6
Equity-based compensation
296.3
264.4
Gain (loss) on derivative instruments
(12.0)
27.6
Non-cash restructuring and other charges
6.1
10.4
Deferred taxes
(1,011.6)
(18.4)
Loss on dispositions
16.5
—
Other
56.5
66.8
Changes in operating assets and liabilities, net of amounts acquired:
Prepaid domain name registry fees
(41.9)
(34.7)
Accounts payable
28.3
35.1
Accrued expenses and other current liabilities
56.4
11.3
Deferred revenue
149.2
101.6
Other operating assets and liabilities
(61.3)
(31.9)
Net cash provided by operating activities
1,047.6
979.7
Investing activities
Purchases of short-term investments
(40.0)
—
Business acquisitions, net of cash acquired
—
(72.5)
Purchases of intangible assets
(35.4)
(0.4)
Net proceeds received from dispositions
12.7
—
Purchases of property and equipment
(42.0)
(59.7)
Purchases of equity investments
(0.5)
—
Other investing activities, net
2.8
0.6
Net cash used in investing activities
(102.4)
(132.0)
Financing activities
Proceeds received from:
Issuance of term loans
1,759.9
1,725.3
Stock option exercises
19.6
19.9
Issuance of Class A common stock under employee stock purchase plan
30.0
30.1
Payments made for:
Repurchases of Class A common stock
(1,270.2)
(1,294.6)
Repayment of term loans
(1,786.3)
(1,789.9)
Financing-related costs
—
(4.2)
Contingent consideration for business acquisitions
(7.5)
(9.3)
Other financing obligations
(7.2)
(4.0)
Net cash used in financing activities
(1,261.7)
(1,326.7)
Effect of exchange rate changes on cash and cash equivalents
1.3
(2.7)
Net decrease in cash and cash equivalents
(315.2)
(481.7)
Cash and cash equivalents, beginning of period
774.0
1,255.7
Cash and cash equivalents, end of period
$ 458.8
$ 774.0
Reconciliation of Non-GAAP Financial Measures
The following tables reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure:
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
NEBITDA and NEBITDA Margin:
(in millions)
Net income
$ 1,132.3
$ 93.8
$ 1,393.8
$ 352.9
Depreciation and amortization
38.7
49.5
171.3
194.6
Equity-based compensation(1)
68.7
71.1
294.0
264.4
Interest expense, net
40.2
36.1
155.4
135.0
Acquisition-related expenses(2)
4.9
7.9
12.1
35.1
Restructuring and other(3)
24.2
5.5
97.9
27.4
Provision (benefit) for income taxes
(984.8)
2.1
(990.0)
3.6
NEBITDA
$ 324.2
$ 266.0
$ 1,134.5
$ 1,013.0
Net income margin
102.9 %
9.0 %
32.8 %
8.6 %
NEBITDA margin
29.5 %
25.6 %
26.7 %
24.8 %
_________________________________
(1)
The year ended December 31, 2023 excludes $2.3 million of equity-based compensation expense associated with our restructuring plan, which is included within restructuring and other.
(2)
The year ended December 31, 2023 includes an adjustment of $6.0 million to a previously-recognized acquisition milestone liability.
(3)
In addition to the restructuring and other in our statements of operations, other charges included are primarily composed of lease-related expenses associated with closed facilities, charges related to certain legal matters, adjustments to the fair value of our equity investments, expenses incurred in relation to the refinancing of our long-term debt and incremental expenses associated with professional services.
December 31,
2023
(in millions)
Net Debt:
Current portion of long-term debt
$ 17.9
Long-term debt
3,798.5
Unamortized original issue discount and debt issuance costs
59.7
Total debt
3,876.1
Less: Cash and cash equivalents
(458.8)
Less: Short-term investments
(40.0)
Net debt
$ 3,377.3
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
(in millions)
Free Cash Flow and Unlevered Free Cash Flow:
Net cash provided by operating activities
$ 297.7
$ 208.0
$ 1,047.6
$ 979.7
Capital expenditures
(4.0)
(17.1)
(42.0)
(59.7)
Cash paid for acquisition-related costs
0.8
7.2
11.2
37.9
Cash paid for restructuring and other charges(1)
10.6
3.5
67.6
10.7
Free cash flow
$ 305.1
$ 201.6
$ 1,084.4
$ 968.6
Cash paid for interest on long-term debt
41.5
36.6
169.8
127.3
Unlevered free cash flow
$ 346.6
$ 238.2
$ 1,254.2
$ 1,095.9
_________________________________
(1)
In addition to payments made pursuant to our February 2023 restructuring plan, cash paid for restructuring and other charges includes a payment related to the termination of a revenue sharing agreement, lease-related payments associated with closed facilities, payments related to certain legal matters as well as third party payments incurred in relation to the refinancing of our long-term debt and incremental payments associated with professional services.
Shares Outstanding
Shares of Class B common stock are not participating securities, and therefore do not have rights to share in our earnings. Total shares of common stock outstanding are as follows:
December 31,
2023
2022
(in thousands)
Shares Outstanding:
Class A common stock
142,051
153,830
Class B common stock
259
312
Total common stock outstanding
142,310
154,142
Effect of dilutive securities(1)
2,599
2,026
Total shares outstanding
144,909
156,168
_________________________________
(1) Calculated using the treasury stock method, which excludes the impact of antidilutive securities.
Constant Currency
The following table provides a reconciliation of constant currency:
Three Months
Ended
December 31, 2023
Year Ended
December 31,
2023
(in millions)
Constant Currency:
Revenue
$ 1,100.3
$ 4,254.1
Constant currency adjustment
(0.1)
25.0
Constant currency revenue
$ 1,100.2
$ 4,279.1
Bookings
$ 1,123.9
$ 4,603.1
Constant currency adjustment
(4.0)
16.8
Constant currency bookings
$ 1,119.9
$ 4,619.9
Source: GoDaddy Inc.
© 2024 GoDaddy Inc. All Rights Reserved.
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SOURCE GoDaddy Inc.
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(650) 584-1901
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ARMONK, N.Y., July 22, 2026 /PRNewswire/ — IBM (NYSE: IBM) today announced second-quarter 2026 earnings results.
“We are confident in IBM’s strategy and portfolio, and in our ability to capture growth opportunities ahead. We fundamentally believe that we are in the early innings of a structural shift for business, and that our portfolio – across software, infrastructure, and consulting – is well-positioned to help our clients tap the value, and manage the challenges, of an AI-driven future,” said Arvind Krishna, IBM chairman, president and chief executive officer. “In addition, we are taking action to accelerate our revenue growth and profitability, driving productivity across the company with AI and automation, and heavily investing in commercializing innovation at speed and scale. We now expect constant currency revenue growth in the range of four-to-five percent, and we continue to expect free cash flow to increase by about $1 billion year-over-year for the full year.”
Full-Year 2026 Expectations
Revenue: The company now expects full-year constant currency revenue growth in the range of four-to-five percent. At current foreign exchange rates, currency is expected to be neutral to growth for the year
Free cash flow: The company continues to expect full-year free cash flow to increase by about $1 billion year-over-year
Operational Focus Areas
High-Growth Portfolio: Areas of IBM’s software business that help clients manage, deploy and build AI-ready solutions, like Red Hat, the watsonx portfolio, HashiCorp, and Confluent continue to deliver strong performance. Within Distributed Infrastructure, Power and Storage grew at a record pace in the second quarter, now having built up an order backlog of nearly $500 million. Together, these offerings closely map to where client demand is strongest. To capture these growth opportunities, IBM is accelerating changes to its go-to-market model by expanding sales coverage across thousands of additional clients where there is significant opportunity. As AI adoption moves from experimentation to enterprise-scale deployment, the company is also investing in more specialized technical and client-facing talent, including Forward Deployed Engineers.
Rapid Innovation at Scale: IBM is acting decisively to capture new opportunities as they arise. Lightwell, a new capability to address open source security vulnerabilities, leverages IBM and Red Hat’s trust within the open source community, unique approach to AI, and global scale. In the first two weeks of availability, Lightwell has already made more than 7,500 open source patches available to help clients secure vulnerabilities. Additionally, quantum computing continues to be an investment priority for the company. In May, with the U.S. Department of Commerce, IBM announced a letter of intent to build Anderon, the world’s first pure-play quantum wafer foundry. IBM will invest more than $10 billion in quantum over the next five years, and remains on track to deliver the first large-scale fault-tolerant quantum computer by 2029.
Productivity Enables Investment and Value: IBM is accelerating productivity by scaling software development leveraging AI, increasing the effectiveness of its sales and marketing organization, and optimizing its supply chain. These efforts help enhance margin and free cash flow, and strengthen the company’s ability to capture significant growth opportunities. The company now expects improved pre-tax income margin expansion for the full year.
“Although we faced revenue headwinds late in the second quarter, we continued to focus on the fundamentals of our business, including driving productivity, strengthening our portfolio, and generating free cash flow,” said James Kavanaugh, IBM senior vice president and chief financial officer. “In a quarter like this, it is critical that our financial and operational discipline remains strong and that we continue to invest for growth while returning value to shareholders through our dividend.”
SECOND-QUARTER 2026 INCOME STATEMENT SUMMARY
Revenue
Gross
Profit
Gross
Profit
Margin
Pre-tax
Income
Pre-tax
Income
Margin
Net
Income
Diluted
Earnings
Per Share
GAAP from
Continuing
Operations
$ 17.2 B
$ 9.9 B
57.7
%
$ 2.5 B
14.4
%
$ 2.2 B
$ 2.27
Year/Year
1
%
(1)
%
(1.0)
Pts
(5)
%
(0.9)
Pts
(1)
%
(2)
%
Operating
(Non-GAAP)
$ 10.2 B
59.4
%
$ 3.3 B
19.2
%
$ 2.8 B
$ 2.93
Year/Year
0
%
(0.7)
Pts
3
%
0.3
Pts
5
%
5
%
Segment Results for Second Quarter
Software — revenues of $7.8 billion, up 5 percent:
– Hybrid Cloud (Red Hat) up 11 percent
– Automation up 4 percent, up 3 percent at constant currency
– Data up 19 percent, up 18 percent at constant currency
– Transaction Processing down 8 percent, down 9 percent at constant currency
Consulting — revenues of $5.3 billion, flat, up 1 percent at constant currency:
– Strategy and Technology flat, up 1 percent at constant currency
– Intelligent Operations flat, up 1 percent at constant currency
Infrastructure — revenues of $3.8 billion, down 7 percent:
– Hybrid Infrastructure down 10 percent
— IBM Z down 42 percent
— Distributed Infrastructure up 37 percent
– Infrastructure Support down 1 percent
Financing — revenues of $0.2 billion, up 12 percent, up 11 percent at constant currency
Cash Flow and Balance Sheet
In the second quarter, the company generated net cash from operating activities of $2.6 billion, up $0.9 billion year to year. IBM’s free cash flow was $2.5 billion, down $0.3 billion year to year. The company returned $1.6 billion to shareholders in dividends in the second quarter.
For the first six months of the year, the company generated net cash from operating activities of $7.8 billion, up $1.7 billion year to year. IBM’s free cash flow was $4.8 billion, flat year to year.
IBM ended the second quarter with $8.2 billion of cash, restricted cash and marketable securities, down $6.3 billion from year-end 2025. The company invested $10.5 billion in acquisitions this year. Debt, including IBM Financing debt of $13.0 billion, totaled $62.0 billion, up $0.7 billion year to date.
Dividend Declaration
The IBM board of directors approved a regular quarterly cash dividend of $1.69 per common share, to stockholders of record on August 10, 2026. With payment of the September 10, 2026 dividend, IBM will have paid consecutive quarterly dividends every year since 1916.
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 divestitures, including integration challenges, failure to achieve objectives, the assumption or retention 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 and service quality issues; the development and use of AI, including the company’s increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other 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.
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
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:
adjusting for currency (i.e., at constant currency);
presenting operating (non-GAAP) earnings per share amounts and related income statement items;
free cash flow;
net cash from operating activities excluding IBM Financing receivables;
adjusted EBITDA;
adjusted EBITDA margin.
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-2q26. 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
Tim Davidson, 914-844-7847
tfdavids@us.ibm.com
Erin McElwee, 347-920-6825
erin.mcelwee@ibm.com
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; $ in millions except per share amounts)
Three Months Ended
June 30,
Six Months Ended
June 30,
2026
2025
2026
2025
REVENUE BY SEGMENT
Software
$ 7,761
$ 7,387
$ 14,813
$ 13,722
Consulting
5,327
5,314
10,599
10,382
Infrastructure
3,835
4,142
7,161
7,027
Financing
186
166
406
357
Other
52
(31)
100
30
TOTAL REVENUE
17,162
16,977
33,079
31,519
GROSS PROFIT
9,907
9,977
18,857
18,008
GROSS PROFIT MARGIN
Software
82.6
%
83.9
%
82.7
%
83.7
%
Consulting
28.9
%
27.5
%
28.2
%
27.4
%
Infrastructure
58.4
%
61.5
%
57.7
%
57.9
%
Financing
42.5
%
45.7
%
43.0
%
45.8
%
TOTAL GROSS PROFIT MARGIN
57.7
%
58.8
%
57.0
%
57.1
%
EXPENSE AND OTHER INCOME
SG&A
4,981
5,027
10,071
9,913
R&D
2,311
2,097
4,485
4,047
Intellectual property and custom development income
(166)
(215)
(338)
(468)
Other (income) and expense
(185)
(39)
(186)
(204)
Interest expense
486
510
959
965
TOTAL EXPENSE AND OTHER INCOME
7,428
7,380
14,991
14,253
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES
2,479
2,597
3,866
3,755
Pre-tax income margin
14.4
%
15.3
%
11.7
%
11.9
%
Provision for/(benefit from) income taxes
313
404
484
507
Effective tax rate
12.6
%
15.5
%
12.5
%
13.5
%
INCOME FROM CONTINUING OPERATIONS
$ 2,166
$ 2,193
$ 3,382
$ 3,248
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of
taxes
(1)
1
(1)
1
NET INCOME
$ 2,165
$ 2,194
$ 3,381
$ 3,249
EARNINGS PER SHARE OF COMMON STOCK
Assuming dilution
Continuing operations
$ 2.27
$ 2.31
$ 3.55
$ 3.43
Discontinued operations
$ 0.00
$ 0.00
$ 0.00
$ 0.00
TOTAL
$ 2.27
$ 2.31
$ 3.55
$ 3.43
Basic
Continuing operations
$ 2.30
$ 2.36
$ 3.60
$ 3.49
Discontinued operations
$ 0.00
$ 0.00
$ 0.00
$ 0.00
TOTAL
$ 2.30
$ 2.36
$ 3.60
$ 3.50
WEIGHTED-AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (M’s)
Assuming dilution
953.3
948.0
952.7
946.7
Basic
941.2
930.8
939.9
929.4
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
($ in millions)
At June 30,
2026
At December 31,
2025
ASSETS:
Current assets:
Cash and cash equivalents
$ 7,172
$ 13,587
Restricted cash
45
54
Marketable securities
960
830
Notes and accounts receivable – trade, net
6,044
8,112
Short-term financing receivables
Held for investment, net
5,782
7,344
Held for sale
874
1,131
Other accounts receivable, net
1,348
1,052
Inventories
1,746
1,220
Deferred costs
1,238
1,084
Prepaid expenses and other current assets
3,188
2,530
Total current assets
28,398
36,944
Property, plant and equipment, net
5,736
5,899
Operating right-of-use assets, net
3,068
3,129
Long-term financing receivables, net
7,126
7,708
Prepaid pension assets
7,645
7,544
Deferred costs
835
825
Deferred taxes
8,709
8,610
Goodwill
74,599
67,717
Intangibles, net
13,955
11,391
Investments and sundry assets
2,028
2,112
Total assets
$ 152,099
$ 151,880
LIABILITIES:
Current Liabilities:
Taxes
$ 2,023
$ 2,347
Short-term debt
5,775
6,424
Accounts payable
4,395
4,756
Compensation and benefits
3,364
4,114
Deferred income
16,160
16,101
Operating lease liabilities
770
800
Other liabilities
3,425
4,116
Total current liabilities
35,912
38,658
Long-term debt
56,212
54,836
Retirement-related obligations
8,603
9,018
Deferred income
4,272
4,271
Operating lease liabilities
2,515
2,547
Other liabilities
10,044
9,810
Total liabilities
117,558
119,139
EQUITY:
IBM stockholders’ equity:
Common stock
64,600
63,318
Retained earnings
155,937
155,648
Treasury stock – at cost
(170,934)
(170,605)
Accumulated other comprehensive income/(loss)
(15,151)
(15,713)
Total IBM stockholders’ equity
34,452
32,648
Noncontrolling interests
89
93
Total equity
34,541
32,740
Total liabilities and equity
$ 152,099
$ 151,880
INTERNATIONAL BUSINESS MACHINES CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in millions)
2026
2025 (1)
2026
2025 (1)
Cash flows from operating activities:
Net income
$ 2,165
$ 2,194
$ 3,381
$ 3,249
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation (2)
533
578
1,088
1,114
Amortization of capitalized software and acquired intangible assets
817
687
1,535
1,328
Stock-based compensation
498
441
1,004
842
Net (gain)/loss on divestitures, asset sales and other
(67)
(18)
(78)
(40)
Changes in operating assets and liabilities, net of
acquisitions/divestitures
(1,349)
(2,180)
836
(421)
Net cash provided by operating activities
2,597
1,701
7,766
6,071
Cash flows from investing activities:
Payments for property, plant and equipment
(229)
(209)
(461)
(454)
Proceeds from disposition of property, plant and equipment/other
23
37
31
111
Investment in software
(154)
(164)
(313)
(314)
Purchases of marketable securities and other investments
(1,259)
(1,255)
(2,871)
(7,740)
Proceeds from disposition of marketable securities and other
investments
1,152
4,036
3,123
4,962
Acquisition of businesses, net of cash acquired
(15)
(747)
(10,480)
(7,845)
Divestiture of businesses, net of cash transferred
–
–
1
(1)
Net cash provided by/(used in) investing activities
(481)
1,698
(10,970)
(11,281)
Cash flows from financing activities:
Proceeds from new debt
0
7
7,437
8,385
Payments to settle debt
(4,213)
(1,308)
(7,141)
(2,565)
Short-term borrowings/(repayments) less than 90 days – net
1
0
0
(29)
Common stock repurchases for tax withholdings
(116)
(153)
(465)
(437)
Proceeds from issuance of shares
240
186
418
401
Financing – other
(49)
(22)
(91)
(54)
Cash dividends paid
(1,590)
(1,563)
(3,166)
(3,112)
Net cash provided by/(used in) financing activities
(5,728)
(2,855)
(3,008)
2,589
Effect of exchange rate changes on cash, cash equivalents and restricted
cash
(35)
320
(211)
487
Net change in cash, cash equivalents and restricted cash
(3,646)
865
(6,423)
(2,134)
Cash, cash equivalents and restricted cash at the beginning of the period
10,864
11,161
13,640
14,160
Cash, cash equivalents and restricted cash at the end of the period
$ 7,217
$ 12,026
$ 7,217
$ 12,026
_____________________
(1) Reclassified to align with the Consolidated Statement of Cash Flows presentation.
(2) Includes operating lease right-of-use assets amortization.
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in billions)
2026
2025
Yr/Yr
2026
2025
Yr/Yr
Net income as reported (GAAP)
$ 2.2
$ 2.2
$ 0.0
$ 3.4
$ 3.2
$ 0.1
Less: income from discontinued operations, net of tax
0.0
0.0
0.0
0.0
0.0
0.0
Income from continuing operations
2.2
2.2
0.0
3.4
3.2
0.1
Provision for/(benefit from) income taxes from continuing ops.
0.3
0.4
(0.1)
0.5
0.5
0.0
Pre-tax income from continuing operations (GAAP)
2.5
2.6
(0.1)
3.9
3.8
0.1
Non-operating adjustments (before tax)
Acquisition-related charges (1)
0.7
0.6
0.1
1.4
1.1
0.2
Non-operating retirement-related costs/(income)
0.1
0.0
0.1
0.2
0.0
0.1
Operating (non-GAAP) pre-tax income from continuing ops.
3.3
3.2
0.1
5.4
4.9
0.5
Net interest expense
0.4
0.3
0.1
0.7
0.6
0.1
Depreciation/amortization of non-acquired intangible assets
0.7
0.7
0.0
1.4
1.4
0.0
Stock-based compensation
0.5
0.4
0.1
1.0
0.8
0.2
Workforce rebalancing charges
0.0
0.0
0.0
0.4
0.3
0.0
Corporate (gains) and charges (2)
(0.1)
0.0
(0.1)
(0.1)
0.0
(0.1)
Adjusted EBITDA
$ 4.8
$ 4.7
$ 0.1
$ 8.8
$ 8.1
$ 0.7
Revenue
$ 17.2
$ 17.0
1 %
$ 33.1
$ 31.5
5 %
GAAP net income margin
12.6 %
12.9 %
(0.3)pts
10.2 %
10.3 %
(0.1)pts
Adjusted EBITDA margin
27.8 %
27.6 %
0.2pts
26.5 %
25.7 %
0.8pts
___________________
(1) Primarily consists of amortization of acquired intangible assets.
(2) Primarily consists of unique corporate actions such as gains on divestitures and asset sales.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
(Unaudited)
Three Months Ended June 30, 2026
($ in millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 7,761
$ 5,327
$ 3,835
$ 186
Segment profit
$ 2,502
$ 647
$ 835
$ 108
Segment profit margin
32.2
%
12.1
%
21.8
%
58.0
%
Change YTY revenue
5.1
%
0.2
%
(7.4)
%
12.2
%
Change YTY revenue – constant currency
4.6
%
1.1
%
(7.4)
%
11.3
%
Three Months Ended June 30, 2025
($ in millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 7,387
$ 5,314
$ 4,142
$ 166
Segment profit
$ 2,296
$ 562
$ 965
$ 179
Segment profit margin
31.1
%
10.6
%
23.3
%
107.9
%
Six Months Ended June 30, 2026
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 14,813
$ 10,599
$ 7,161
$ 406
Segment Profit
$ 4,601
$ 1,205
$ 1,360
$ 226
Segment Profit Margin
31.1
%
11.4
%
19.0
%
55.8
%
Change YTY Revenue
7.9
%
2.1
%
1.9
%
13.6
%
Change YTY Revenue – Constant Currency
6.1
%
1.0
%
0.5
%
10.7
%
Six Months Ended June 30, 2025
(Dollars in Millions)
Software
Consulting
Infrastructure
Financing
Revenue
$ 13,722
$ 10,382
$ 7,027
$ 357
Segment Profit
$ 4,143
$ 1,121
$ 1,213
$ 248
Segment Profit Margin
30.2
%
10.8
%
17.3
%
69.3
%
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)
Three Months Ended June 30, 2026
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross profit
$ 9,907
$ 287
$ —
$ —
$ 10,194
Gross profit margin
57.7
%
1.7
pts
—
pts
—
pts
59.4
%
SG&A
$ 4,981
$ (421)
$ —
$ —
$ 4,560
Other (income) & expense
(185)
1
(96)
—
(280)
Total expense & other (income)
7,428
(429)
(96)
—
6,903
Pre-tax income from continuing operations
2,479
716
96
—
3,290
Pre-tax income margin from continuing
operations
14.4
%
4.2
pts
0.6
pts
—
pts
19.2
%
Provision for/(benefit from) income taxes (3)
$ 313
$ 167
$ 20
$ (2)
$ 498
Effective tax rate
12.6
%
2.3
pts
0.2
pts
(0.1)
pts
15.1
%
Income from continuing operations
$ 2,166
$ 548
$ 76
$ 2
$ 2,792
Income margin from continuing operations
12.6
%
3.2
pts
0.4
pts
0.0
pts
16.3
%
Diluted earnings per share: continuing
operations
$ 2.27
$ 0.58
$ 0.08
$ 0.00
$ 2.93
Three Months Ended June 30, 2025
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross profit
$ 9,977
$ 225
$ —
$ —
$ 10,202
Gross profit margin
58.8
%
1.3
pts
—
pts
—
pts
60.1
%
SG&A
$ 5,027
$ (348)
$ —
$ —
$ 4,679
Other (income) & expense
(39)
(1)
(25)
—
(65)
Total expense & other (income)
7,380
(350)
(25)
—
7,005
Pre-tax income from continuing operations
2,597
575
25
—
3,197
Pre-tax income margin from continuing
operations
15.3
%
3.4
pts
0.1
pts
—
pts
18.8
%
Provision for/(benefit from) income taxes (3)
$ 404
$ 132
$ 9
$ —
$ 545
Effective tax rate
15.5
%
1.3
pts
0.2
pts
—
pts
17.0
%
Income from continuing operations
$ 2,193
$ 443
$ 17
$ —
$ 2,652
Income margin from continuing operations
12.9
%
2.6
pts
0.1
pts
—
pts
15.6
%
Diluted earnings per share: continuing
operations
$ 2.31
$ 0.47
$ 0.02
$ —
$ 2.80
____________________
(1) Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction
costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as
financing costs.
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan
curtailments/settlements and pension insolvency costs and other costs.
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to
the GAAP pre-tax income.
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)
Six Months Ended June 30, 2026
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross Profit
$ 18,857
$ 524
$ —
$ —
$ 19,380
Gross Profit Margin
57.0
%
1.6
pts
—
pts
—
pts
58.6
%
SG&A
$ 10,071
$ (829)
$ —
$ —
$ 9,242
Other (Income) & Expense
(186)
1
(192)
—
(378)
Total Expense & Other (Income)
14,991
(838)
(192)
—
13,961
Pre-tax Income from Continuing Operations
3,866
1,361
192
—
5,419
Pre-tax Income Margin from Continuing
Operations
11.7
%
4.1
pts
0.6
pts
—
pts
16.4
%
Provision for/(Benefit from) Income Taxes (3)
$ 484
$ 305
$ 23
$ (6)
$ 806
Effective Tax Rate
12.5
%
2.5
pts
0.0
pts
(0.1)
pts
14.9
%
Income from Continuing Operations
$ 3,382
$ 1,056
$ 169
$ 6
$ 4,613
Income Margin from Continuing Operations
10.2
%
3.2
pts
0.5
pts
0.0
pts
13.9
%
Diluted Earnings Per Share: Continuing
Operations
$ 3.55
$ 1.11
$ 0.18
$ 0.01
$ 4.84
Six Months Ended June 30, 2025
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Tax
Reform
Impacts
Operating
(Non-
GAAP)
Gross Profit
$ 18,008
$ 426
$ —
$ —
$ 18,434
Gross Profit Margin
57.1
%
1.4
pts
—
pts
—
pts
58.5
%
SG&A
$ 9,913
$ (701)
$ —
$ —
$ 9,212
Other (Income) & Expense
(204)
(1)
(48)
—
(253)
Total Expense & Other (Income)
14,253
(706)
(48)
—
13,499
Pre-tax Income from Continuing Operations
3,755
1,132
48
—
4,935
Pre-tax Income Margin from Continuing
Operations
11.9
%
3.6
pts
0.2
pts
—
pts
15.7
%
Provision for/(Benefit from) Income Taxes (3)
$ 507
$ 260
$ (3)
$ 2
$ 766
Effective Tax Rate
13.5
%
2.2
pts
(0.2)
pts
0.0
pts
15.5
%
Income from Continuing Operations
$ 3,248
$ 872
$ 51
$ (2)
$ 4,169
Income Margin from Continuing Operations
10.3
%
2.8
pts
0.2
pts
0.0
pts
13.2
%
Diluted Earnings Per Share: Continuing
Operations
$ 3.43
$ 0.92
$ 0.05
$ 0.00
$ 4.40
____________________
(1) Includes amortization of acquired intangible assets, and acquisition-related charges such as in-process research and development, transaction
costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as
financing costs.
(2) Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan
curtailments/settlements and pension insolvency costs and other costs.
(3) The tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to
the GAAP pre-tax income.
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in millions)
2026
2025
2026
2025
Net cash provided by operating activities per GAAP
$ 2,597
$ 1,701
$ 7,766
$ 6,071
Less: change in IBM Financing receivables
(302)
(1,480)
2,264
606
Net cash from operating activities excl. IBM Financing receivables
2,899
3,182
5,503
5,465
Capital expenditures, net
(359)
(336)
(743)
(657)
Free cash flow
$ 2,540
$ 2,845
$ 4,760
$ 4,808
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
($ in billions)
2026
2025
2026
2025
Net cash provided by operating activities
$ 2.6
$ 1.7
$ 7.8
$ 6.1
Add:
Net interest expense
0.4
0.3
0.7
0.6
Provision for/(benefit from) income taxes from continuing operations
0.3
0.4
0.5
0.5
Less change in:
Financing receivables
(0.3)
(1.5)
2.3
0.6
Net (gain)/loss on divestitures, assets sales and other (1)
(0.1)
0.0
(0.1)
0.0
Other assets and liabilities/other, net (1,2)
(1.1)
(0.7)
(2.0)
(1.5)
Adjusted EBITDA
$ 4.8
$ 4.7
$ 8.8
$ 8.1
Revenue
$ 17.2
$ 17.0
$ 33.1
$ 31.5
Net cash provided by operating activities margin
15.1 %
10.0 %
23.5 %
19.3 %
Adjusted EBITDA margin
27.8 %
27.6 %
26.5 %
25.7 %
____________________
(1) Reclassified to align with the presentation of similar line items in the Statement of Cash Flows.
(2) Mainly consists of Changes in operating assets and liabilities, net of acquisitions/divestitures in the Statement of Cash Flows chart,
workforce rebalancing charges, non-operating impacts, and corporate (gains) and charges, less the change in Financing receivables.
View original content to download multimedia:https://www.prnewswire.com/news-releases/ibm-releases-second-quarter-results-302832559.html
SOURCE IBM
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