IBM Earnings Falter as Coronavirus Accelerates Turnaround Push

By Asa Fitch

International Business Machines Corp.'s earnings declined in the second quarter against the backdrop of a pandemic that has roiled many of its corporate customers.

Armonk, N.Y.-based IBM had been searching for growth under new Chief Executive Arvind Krishna after several years of mostly declining revenue under his predecessor, Ginni Rometty. Cloud computing and artificial intelligence have become focal points in recent years for the 109-year-old company, which became a corporate mainstay with its mainframe computers and information-technology services.

But IBM officials and industry analysts have said some companies have been skittish about technology purchases with the economic uncertainty caused by the coronavirus, which would hurt IBM's top line. The pandemic prompted IBM in April to withdraw its full-year guidance. The company also laid off thousands of employees in the past two months, spurred by both the pandemic and a broader reorientation of its business.

IBM said Monday its second-quarter revenue fell by 5.4%, albeit a smaller decline than Wall Street analysts were forecasting, to $18.12 billion. Earnings per share also fell to $1.52 from $2.81 in the same period last year. IBM beat analysts' expectations for earnings on an adjusted basis.

Despite the rocky performance, IBM said its cloud-computing revenue was $6.3 billion during the second quarter, up 30% from a year earlier.

IBM's shares rose 3.6% in after-hours trading. The company's share price has fallen 5.7% this year, compared with a slight gain in the S&P 500.

IBM is one of the first big U.S. tech companies to report results for the second quarter. Chip maker Intel Corp. reports later this week, while Amazon.com Inc., Apple Inc., Google parent Alphabet Inc. and Facebook Inc. report quarterly financial results next week.

The U.S. technology sector has shown resilience in the coronavirus era as more people work from home and use computer hardware, software and internet services, but they haven't been immune to such negative effects as a drop-off in advertising and lower demand for smartphones.

Write to Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

July 20, 2020 16:38 ET (20:38 GMT)

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