8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: October 25, 2023

(Date of earliest event reported)

INTERNATIONAL BUSINESS MACHINES CORPORATION

(Exact name of registrant as specified in its charter)

New York	1-2360	13-0871985
(State of Incorporation)	(Commission File Number)	(IRS employer Identification No.)

One New Orchard Road Armonk, New York	10504
(Address of principal executive offices)	(Zip Code)

914-499-1900

(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Capital stock, par value $.20 per share	IBM	New York Stock Exchange
		NYSE Chicago
1.125% Notes due 2024	IBM 24A	New York Stock Exchange
2.875% Notes due 2025	IBM 25A	New York Stock Exchange
0.950% Notes due 2025	IBM 25B	New York Stock Exchange
0.875% Notes due 2025	IBM 25C	New York Stock Exchange
0.300% Notes due 2026	IBM 26B	New York Stock Exchange
1.250% Notes due 2027	IBM 27B	New York Stock Exchange
3.375% Notes due 2027	IBM 27F	New York Stock Exchange
0.300% Notes due 2028	IBM 28B	New York Stock Exchange
1.750% Notes due 2028	IBM 28A	New York Stock Exchange
1.500% Notes due 2029	IBM 29	New York Stock Exchange
0.875% Notes due 2030	IBM 30A	New York Stock Exchange
1.750% Notes due 2031	IBM 31	New York Stock Exchange
3.625% Notes due 2031	IBM 31B	New York Stock Exchange
0.650% Notes due 2032	IBM 32A	New York Stock Exchange
1.250% Notes due 2034	IBM 34	New York Stock Exchange
3.750% Notes due 2035	IBM 35	New York Stock Exchange
4.875% Notes due 2038	IBM 38	New York Stock Exchange
1.200% Notes due 2040	IBM 40	New York Stock Exchange
4.000% Notes due 2043	IBM 43	New York Stock Exchange
7.00% Debentures due 2025	IBM 25	New York Stock Exchange
6.22% Debentures due 2027	IBM 27	New York Stock Exchange
6.50% Debentures due 2028	IBM 28	New York Stock Exchange
5.875% Debentures due 2032	IBM 32D	New York Stock Exchange
7.00% Debentures due 2045	IBM 45	New York Stock Exchange
7.125% Debentures due 2096	IBM 96	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

The registrant’s press release dated October 25, 2023, regarding its financial results for the period ended September 30, 2023, including consolidated financial statements for the period ended September 30, 2023, is Exhibit 99.1 of this Form 8-K.

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 disclosed in the attached press release certain non-GAAP information which management believes provides useful information to investors. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included in the press release, which is Exhibit 99.1 to this Form 8-K. The rationale for management’s use of non-GAAP measures is included in Exhibit 99.2 to this Form 8-K.

The information in this Item 2.02, including the corresponding Exhibits 99.1 and 99.2, is being furnished with the Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

The following exhibits are being furnished as part of this report:

Exhibit No.	Description of Exhibit
99.1	Earnings Release of the Registrant, dated October 25, 2023
99.2	Non-GAAP Financial Information

The following exhibit is being filed as part of this report:

Exhibit No.	Description of Exhibit
104	Cover Page Interactive Data File (embedded within the Inline XBRL Document)

IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/). IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: October 25, 2023
	By:	/s/ Nicolás A. Fehring
		Nicolás A. Fehring
		Vice President and Controller

3

EX-99.1

Exhibit 99.1

IBM RELEASES THIRD-QUARTER RESULTS

Revenue growth led by Software and Consulting; Strong profit and cash generation

ARMONK, N.Y., October 25, 2023 . . . IBM (NYSE: IBM) today announced third-quarter 2023 earnings results.

“Technology remains a critical source of competitive differentiation and progress for organizations around the world," said Arvind Krishna, IBM chairman and chief executive officer. "Clients are increasingly adopting our watsonx AI and data platform along with our hybrid cloud solutions to unlock productivity and operational efficiency. This is helping drive solid growth in our software and consulting businesses. As a result, we remain confident in our revenue and free cash flow growth expectations for the full year.”

Third-Quarter Highlights

•Revenue

–Revenue of $14.8 billion, up 4.6 percent, up 3.5 percent at constant currency

–Software revenue up 8 percent, up 6 percent at constant currency

–Consulting revenue up 6 percent, up 5 percent at constant currency

–Infrastructure revenue down 2 percent, down 3 percent at constant currency

•Profit Margin

–Gross Profit Margin: GAAP: 54.4 percent, up 1.7 points; Operating (Non-GAAP): 55.5 percent, up 1.6 points

–Pre-Tax Income Margin: GAAP: 12.7 percent, up 44.6 points; Operating (Non-GAAP): 15.6 percent, up 1.7 points

•Cash Flow

–Year to date net cash from operating activities of $9.5 billion, up $3.0 billion; free cash flow of $5.1 billion, up $1.0 billion

	THIRD QUARTER 2023 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	$	14.8B		$	8.0B		54.4	%	$	1.9B		12.7	%	$	1.7B		$	1.86
Year/Year	4.6		%*	8		%	1.7	Pts	NM		**	44.6	Pts**	NM		**	NM		**
Operating (Non-GAAP)				$	8.2B		55.5	%	$	2.3B		15.6	%	$	2.0B		$	2.20
Year/Year				8		%	1.6	Pts	17		%	1.7	Pts	23		%	22		%

* 3.5% at constant currency

** GAAP YTY results include the impact of a one-time, non-cash pension settlement charge related to the transfer of a portion of the company's U.S. defined benefit pension obligations and related plan assets to third-party insurers in third quarter 2022.

“Our continued focus on the fundamentals of our business is driving solid revenue growth, profit margin expansion, and strong cash generation," said James Kavanaugh, IBM senior vice president and chief financial officer. "That cash generation has enabled us to increase our investment in R&D and acquisitions, strengthening our future AI and hybrid cloud capabilities, while supporting continued shareholder returns through our dividend.”

Segment Results for Third Quarter

•Software — revenues of $6.3 billion, up 7.8 percent, up 6.3 percent at constant currency:

–Hybrid Platform & Solutions up 8 percent, up 7 percent at constant currency:

•Red Hat up 9 percent, up 8 percent at constant currency

•Automation up 14 percent, up 13 percent at constant currency

•Data & AI up 6 percent

•Security down 2 percent, down 3 percent at constant currency

–Transaction Processing up 7 percent, up 5 percent at constant currency

•Consulting — revenues of $5.0 billion, up 5.6 percent, up 5.0 percent at constant currency:

–Business Transformation up 6 percent, up 5 percent at constant currency

–Technology Consulting up 2 percent, up 1 percent at constant currency

–Application Operations up 7 percent

•Infrastructure — revenues of $3.3 billion, down 2.4 percent, down 3.2 percent at constant currency:

–Hybrid Infrastructure up 1 percent, flat at constant currency

•IBM zSystems up 9 percent

•Distributed Infrastructure down 4 percent, down 6 percent at constant currency

–Infrastructure Support down 6 percent, down 7 percent at constant currency

•Financing — revenues of $0.2 billion, up 6.9 percent, up 5.1 percent at constant currency

Cash Flow and Balance Sheet

In the third quarter, the company generated net cash from operating activities of $3.1 billion, up $1.2 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $2.0 billion. IBM’s free cash flow was $1.7 billion, up $0.9 billion year to year. The company returned $1.5 billion to shareholders in dividends in the third quarter.

For the first nine months of the year, the company generated net cash from operating activities of $9.5 billion, up $3.0 billion year to year. Net cash from operating activities excluding IBM Financing receivables was $6.3 billion. IBM's free cash flow was $5.1 billion, up $1.0 billion year to year.

IBM ended the third quarter with $11.0 billion of cash and marketable securities, up $2.2 billion from year-end 2022. Debt, including IBM Financing debt of $9.9 billion, totaled $55.2 billion, up $4.3 billion since the end of 2022.

Full-Year 2023 Expectations

•Revenue: The company continues to expect constant currency revenue growth of three percent to five percent. At current foreign exchange rates, currency is expected to be about a one-point headwind to revenue growth.

•Free cash flow: The company continues to expect about $10.5 billion in free cash flow, up more than $1 billion year to year.

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 dispositions, including integration challenges, failure to achieve objectives, the assumption 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 quality issues; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data privacy considerations; adverse effects related to climate change and 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; potential failure of the separation of Kyndryl Holdings, Inc. to qualify for tax-free treatment; 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:

IBM results —

•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.

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-3q23.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
	Sarah Meron, 347-891-1770
	sarah.meron@ibm.com
	Tim Davidson, 914-844-7847
	tfdavids@us.ibm.com

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022*			2023			2022*
REVENUE BY SEGMENT
Software	$	6,265		$	5,811		$	18,794		$	17,749
Consulting	4,963			4,700			14,938			14,337
Infrastructure	3,272			3,352			9,988			10,805
Financing	186			174			566			474
Other	67			70			192			475
TOTAL REVENUE	14,752			14,107			44,479			43,840
GROSS PROFIT	8,023			7,430			24,033			23,055
GROSS PROFIT MARGIN
Software	79.5		%	79.0		%	79.4		%	79.0		%
Consulting	27.4		%	26.0		%	26.2		%	24.8		%
Infrastructure	53.5		%	50.8		%	53.8		%	51.9		%
Financing	49.7		%	32.8		%	47.5		%	35.1		%
TOTAL GROSS PROFIT MARGIN	54.4		%	52.7		%	54.0		%	52.6		%
EXPENSE AND OTHER INCOME
S,G&A	4,458			4,391			14,212			13,843
R,D&E	1,685			1,611			5,027			4,963
Intellectual property and custom development income	(190)			(121)			(618)			(418)
Other (income) and expense	(215)			5,755			(721)			5,921
Interest expense	412			295			1,202			903
TOTAL EXPENSE AND OTHER INCOME	6,150			11,931			19,102			25,212
INCOME/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	1,873			(4,501)			4,931			(2,156)
Pre-tax margin	12.7		%	(31.9)		%	11.1		%	(4.9)		%
Provision for/(Benefit from) income taxes	159			(1,287)			702			(1,070)
Effective tax rate	8.5		%	28.6		%	14.2		%	49.6		%
INCOME/(LOSS) FROM CONTINUING OPERATIONS	$	1,714		$	(3,214)		$	4,229		$	(1,087)
DISCONTINUED OPERATIONS
Income/(loss) from discontinued operations, net of taxes	(10)			18			(15)			16
NET INCOME/(LOSS)	$	1,704		$	(3,196)		$	4,214		$	(1,071)
EARNINGS/(LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$	1.86		$	(3.55)		$	4.59		$	(1.21)
Discontinued Operations	$	(0.01)		$	0.02		$	(0.02)		$	0.02
TOTAL	$	1.84		$	(3.54)		$	4.58		$	(1.19)
Basic
Continuing Operations	$	1.88		$	(3.55)		$	4.65		$	(1.21)
Discontinued Operations	$	(0.01)		$	0.02		$	(0.02)		$	0.02
TOTAL	$	1.87		$	(3.54)		$	4.63		$	(1.19)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s)
Assuming Dilution	923.7			904.1			920.3			901.6
Basic	912.8			904.1			910.1			901.6

* Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(Dollars in Millions)	At September 30, 2023		At December 31, 2022
ASSETS:
Current Assets:
Cash and cash equivalents	$	7,257	$	7,886
Restricted cash	19		103
Marketable securities	3,721		852
Notes and accounts receivable - trade, net	5,330		6,541
Short-term financing receivables, net	5,625		7,790
Other accounts receivable, net	842		817
Inventories	1,399		1,552
Deferred costs	931		967
Prepaid expenses and other current assets	2,582		2,611
Total Current Assets	27,705		29,118
Property, plant and equipment, net	5,369		5,334
Operating right-of-use assets, net	3,112		2,878
Long-term financing receivables, net	4,789		5,806
Prepaid pension assets	8,901		8,236
Deferred costs	822		866
Deferred taxes	6,168		6,256
Goodwill	59,596		55,949
Intangibles, net	11,278		11,184
Investments and sundry assets	1,582		1,617
Total Assets	$	129,321	$	127,243
LIABILITIES:
Current Liabilities:
Taxes	$	1,559	$	2,196
Short-term debt	6,414		4,760
Accounts payable	3,342		4,051
Deferred income	11,917		12,032
Operating lease liabilities	807		874
Other liabilities	6,566		7,592
Total Current Liabilities	30,606		31,505
Long-term debt	48,828		46,189
Retirement related obligations	9,090		9,596
Deferred income	3,085		3,499
Operating lease liabilities	2,476		2,190
Other liabilities	12,081		12,243
Total Liabilities	106,165		105,222
EQUITY:
IBM Stockholders’ Equity:
Common stock	59,313		58,343
Retained earnings	149,506		149,825
Treasury stock — at cost	(169,640)		(169,484)
Accumulated other comprehensive income/(loss)	(16,098)		(16,740)
Total IBM Stockholders’ Equity	23,081		21,944
Noncontrolling interests	75		77
Total Equity	23,156		22,021
Total Liabilities and Equity	$	129,321	$	127,243

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,				Trailing Twelve Months Ended September 30,
(Dollars in Millions)	2023		2022		2023		2022*		2023
Net Cash from Operations per GAAP	$	3,055	$	1,901	$	9,468	$	6,470	$	13,432
Less: change in IBM Financing receivables	1,092		704		3,119		1,071		1,331
Capital Expenditures, net	(282)		(445)		(1,226)		(1,317)		(1,769)
Free Cash Flow	1,682		752		5,123		4,082		10,332
Acquisitions	(4,589)		(62)		(4,945)		(1,020)		(6,274)
Divestitures	(10)		3		(4)		1,271		(3)
Dividends	(1,515)		(1,491)		(4,522)		(4,454)		(6,016)
Non-Financing Debt	(942)		2,946		7,572		4,686		4,795
Other (includes IBM Financing net receivables and debt)	41		(198)		(1,068)		(2,395)		(1,566)
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities	$	(5,333)	$	1,950	$	2,156	$	2,171	$	1,268

*Includes immaterial cash flows from discontinued operations.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2023		2022		2023		2022*
Net Income/(Loss) from Operations	$	1,704	$	(3,196)	$	4,214	$	(1,071)
Pension Settlement Charge	-		5,894		-		5,894
Depreciation/Amortization of Intangibles	1,093		1,163		3,243		3,665
Stock-based Compensation	286		251		843		739
Working Capital / Other	(1,119)		(2,914)		(1,952)		(3,827)
IBM Financing A/R	1,092		704		3,119		1,071
Net Cash Provided by Operating Activities	$	3,055	$	1,901	$	9,468	$	6,470
Capital Expenditures, net of payments & proceeds	(282)		(445)		(1,226)		(1,317)
Divestitures, net of cash transferred	(10)		3		(4)		1,271
Acquisitions, net of cash acquired	(4,589)		(62)		(4,945)		(1,020)
Marketable Securities / Other Investments, net	2,927		(1,193)		(3,732)		(1,818)
Net Cash Provided by/(Used in) Investing Activities	$	(1,953)	$	(1,697)	$	(9,906)	$	(2,883)
Debt, net of payments & proceeds	(1,550)		2,138		4,619		2,572
Dividends	(1,515)		(1,491)		(4,522)		(4,454)
Financing - Other	(67)		67		(252)		(223)
Net Cash Provided by/(Used in) Financing Activities	$	(3,132)	$	714	$	(154)	$	(2,106)
Effect of Exchange Rate changes on Cash	(119)		(197)		(120)		(463)
Net Change in Cash, Cash Equivalents and Restricted Cash	$	(2,149)	$	721	$	(713)	$	1,018

*Includes immaterial cash flows from discontinued operations.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

	Three Months Ended September 30, 2023
(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	6,265		$	4,963		$	3,272		$	186
Pre-tax Income from Continuing Operations*	$	1,486		$	509		$	387		$	91
Pre-tax Margin*	23.7		%	10.2		%	11.8		%	49.2		%
Change YTY Revenue	7.8		%	5.6		%	(2.4)		%	6.9		%
Change YTY Revenue - Constant Currency	6.3		%	5.0		%	(3.2)		%	5.1		%

	Three Months Ended September 30, 2022
(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	5,811		$	4,700		$	3,352		$	174
Pre-tax Income from Continuing Operations	$	1,306		$	462		$	280		$	79
Pre-tax Margin	22.5		%	9.8		%	8.3		%	45.4		%

*The third quarter 2023 pre-tax charge of approximately $0.03 billion for workforce rebalancing is not included in the measure of segment pre-tax income, consistent with the company's management system.

	Nine Months Ended September 30, 2023
(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	18,794		$	14,938		$	9,988		$	566
Pre-tax Income from Continuing Operations*	$	4,154		$	1,336		$	1,236		$	256
Pre-tax Margin*	22.1		%	8.9		%	12.4		%	45.3		%
Change YTY Revenue	5.9		%	4.2		%	(7.6)		%	19.5		%
Change YTY Revenue - Constant Currency	6.5		%	6.4		%	(6.4)		%	20.3		%

	Nine Months Ended September 30, 2022
(Dollars in Millions)	Software			Consulting			Infrastructure			Financing
Revenue	$	17,749		$	14,337		$	10,805		$	474
Pre-tax Income from Continuing Operations	$	3,816		$	1,154		$	1,236		$	265
Pre-tax Margin	21.5		%	8.0		%	11.4		%	55.9		%

*The year-to-date 2023 pre-tax charge of approximately $0.41 billion for workforce rebalancing is not included in the measure of segment pre-tax income, consistent with the company's management system.

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

	Three Months Ended September 30, 2023
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Kyndryl- Related Impacts (3)			Operating (Non-GAAP)
Gross Profit	$	8,023		$	162		$	—		$	—		$	—		$	8,185
Gross Profit Margin	54.4		%	1.1		pts.	—		pts.	—		pts.	—		pts.	55.5		%
S,G&A	$	4,458		$	(277)		$	—		$	—		$	—		$	4,181
Other (Income) & Expense	(215)			—			12			—			—			(203)
Total Expense & Other (Income)	6,150			(277)			12			—			—			5,885
Pre-tax Income from Continuing Operations	1,873			438			(12)			—			—			2,299
Pre-tax Income Margin from Continuing Operations	12.7		%	3.0		pts.	(0.1)		pts.	—		pts.	—		pts.	15.6		%
Provision for/(Benefit from) Income Taxes (4)	$	159		$	99		$	(14)		$	24		$	—		$	268
Effective Tax Rate	8.5		%	2.7		pts.	(0.5)		pts.	1.0		pts.	—		pts.	11.7		%
Income from Continuing Operations	$	1,714		$	340		$	1		$	(24)		$	—		$	2,031
Income Margin from Continuing Operations	11.6		%	2.3		pts.	0.0		pts.	(0.2)		pts.	—		pts.	13.8		%
Diluted Earnings Per Share: Continuing Operations	$	1.86		$	0.37		$	0.00		$	(0.03)		$	—		$	2.20

	Three Months Ended September 30, 2022
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Kyndryl- Related Impacts (3)			Operating (Non-GAAP)
Gross Profit	$	7,430		$	165		$	—		$	—		$	—		$	7,595
Gross Profit Margin	52.7		%	1.2		pts.	—		pts.	—		pts.	—		pts.	53.8		%
S,G&A	$	4,391		$	(253)		$	—		$	—		$	0		$	4,138
Other (Income) & Expense	5,755			(1)			(6,062)			—			14			(293)
Total Expense & Other (Income)	11,931			(253)			(6,062)			—			14			5,630
Pre-tax Income/(Loss) from Continuing Operations	(4,501)			418			6,062			—			(14)			1,965
Pre-tax Income/(Loss) Margin from Continuing Operations	(31.9)		%	3.0		pts.	43.0		pts.	—		pts.	(0.1)		pts.	13.9		%
Provision for/(Benefit from) Income Taxes (4)	$	(1,287)		$	103		$	1,495		$	—		$	—		$	312
Effective Tax Rate	28.6		%	(0.8)		pts.	(12.1)		pts.	—		pts.	0.2		pts.	15.9		%
Income/(Loss) from Continuing Operations	$	(3,214)		$	315		$	4,566		$	—		$	(14)		$	1,653
Income/(Loss) Margin from Continuing Operations	(22.8)		%	2.2		pts.	32.4		pts.	—		pts.	(0.1)		pts.	11.7		%
Diluted Earnings/(Loss) Per Share: Continuing Operations (5)	$	(3.55)		$	0.35		$	5.05		$	—		$	(0.02)		$	1.81

(1)Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable 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. 2022 also includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).

(3)Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related cash-settled swap.

(4)Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

(5)Due to the GAAP net loss for the three months ended September 30, 2022, dilutive potential shares were excluded from the GAAP loss per share as the effect would have been antidilutive. The difference in share count resulted in an additional ($0.02) reconciling item.

INTERNATIONAL BUSINESS MACHINES CORPORATION

U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION

(Unaudited; Dollars in millions except per share amounts)

	Nine Months Ended September 30, 2023
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Kyndryl- Related Impacts (3)			Operating (Non-GAAP)
Gross Profit	$	24,033		$	460		$	—		$	—		$	—		$	24,492
Gross Profit Margin	54.0		%	1.0		pts.	—		pts.	—		pts.	—		pts.	55.1		%
S,G&A	$	14,212		$	(768)		$	—		$	—		$	—		$	13,444
Other (Income) & Expense	(721)			(2)			16			—			—			(707)
Total Expense & Other (Income)	19,102			(770)			16			—			—			18,348
Pre-tax Income from Continuing Operations	4,931			1,229			(16)			—			—			6,144
Pre-tax Income Margin from Continuing Operations	11.1		%	2.8		pts.	0.0		pts.	—		pts.	—		pts.	13.8		%
Provision for/(Benefit from) Income Taxes (4)	$	702		$	277		$	(27)		$	(91)		$	—		$	861
Effective Tax Rate	14.2		%	1.7		pts.	(0.4)		pts.	(1.5)		pts.	—		pts.	14.0		%
Income from Continuing Operations	$	4,229		$	953		$	11		$	91		$	—		$	5,283
Income Margin from Continuing Operations	9.5		%	2.1		pts.	0.0		pts.	0.2		pts.	—		pts.	11.9		%
Diluted Earnings Per Share: Continuing Operations	$	4.59		$	1.04		$	0.01		$	0.10		$	—		$	5.74

	Nine Months Ended September 30, 2022
	Continuing Operations
	GAAP			Acquisition- Related Adjustments (1)			Retirement- Related Adjustments (2)			Tax Reform Impacts			Kyndryl- Related Impacts (3)			Operating (Non-GAAP)
Gross Profit	$	23,055		$	526		$	—		$	—		$	—		$	23,582
Gross Profit Margin	52.6		%	1.2		pts.	—		pts.	—		pts.	—		pts.	53.8		%
S,G&A	$	13,843		$	(818)		$	—		$	—		$	0		$	13,025
Other (Income) & Expense	5,921			(2)			(6,455)			—			(353)			(889)
Total Expense & Other (Income)	25,212			(820)			(6,455)			—			(353)			17,584
Pre-tax Income/(Loss) from Continuing Operations	(2,156)			1,346			6,455			—			353			5,998
Pre-tax Income/(Loss) Margin from Continuing Operations	(4.9)		%	3.1		pts.	14.7		pts.	—		pts.	0.8		pts.	13.7		%
Provision for/(Benefit from) Income Taxes (4)	$	(1,070)		$	327		$	1,599		$	112		$	—		$	969
Effective Tax Rate	49.6		%	(5.7)		pts.	(26.7)		pts.	1.9		pts.	(2.9)		pts.	16.1		%
Income/(Loss) from Continuing Operations	$	(1,087)		$	1,019		$	4,856		$	(112)		$	353		$	5,029
Income/(Loss) Margin from Continuing Operations	(2.5)		%	2.3		pts.	11.1		pts.	(0.3)		pts.	0.8		pts.	11.5		%
Diluted Earnings/(Loss) Per Share: Continuing Operations (5)	$	(1.21)		$	1.13		$	5.39		$	(0.12)		$	0.39		$	5.52

(1)Includes amortization of purchased intangible assets, in process R&D, transaction costs, applicable 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. 2022 also includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion net of tax).

(3)Primarily relates to fair value changes in shares of Kyndryl common stock that were retained by IBM and the related cash-settled swap.

(4)Tax impact on operating (non-GAAP) pre-tax income from continuing operations is calculated under the same accounting principles applied to the As Reported pre-tax income under ASC 740, which employs an annual effective tax rate method to the results.

(5)Due to GAAP net loss for the nine months ended September 30, 2022, dilutive potential shares were excluded from the GAAP loss per share calculation as the effect would have been antidilutive. The difference in share count resulted in an additional ($0.06) reconciling item.

EX-99.2

Exhibit 99.2

Non-GAAP Financial Information

Operating (non-GAAP) Earnings Per Share and Related Income Statement Items

In an effort to provide better transparency into the operational results of the business, supplementally, the company separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges, intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs, certain impacts from the Kyndryl separation and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform), the company characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to that charge as non-operating. Adjustments primarily include true-ups, accounting elections and any changes to regulations, laws, audit adjustments that affect the recorded one-time charge. Management characterizes direct and incremental charges incurred related to the Kyndryl separation as non-operating given their unique and non-recurring nature. In 2022, these charges primarily related to any net gains or losses on the Kyndryl common stock and the related cash-settled swap with a third-party financial institution, which were recorded in other (income) and expense in the Consolidated Income Statement. As of November 2, 2022, the company no longer held an ownership interest in Kyndryl. For acquisitions, operating (non-GAAP) earnings exclude the amortization of purchased 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. These charges are excluded as they may be inconsistent in amount and timing from period to period and are significantly impacted by the size, type and frequency of the company’s acquisitions. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, the company characterizes certain items as operating and others as non-operating, consistent with GAAP. The company includes defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs include defined benefit plan and nonpension postretirement benefit plan amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements including a one-time, non-cash, pre-tax settlement charge of $5.9 billion ($4.4 billion net of tax) in the third quarter of 2022 and pension insolvency costs and other costs. Non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance, and the company considers these costs to be outside of the operational performance of the business.

Overall, the company believes that supplementally providing investors with a view of operating earnings as described above provides increased transparency and clarity into both the operational results of the business and the performance of the company’s pension plans; improves visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows the company to provide a long-term strategic view of the business going forward. In addition, these non-GAAP measures provide a perspective consistent with areas of interest the company routinely receives from investors and analysts. The company’s reportable segment financial results reflect pre-tax operating earnings from continuing operations, consistent with the company’s management and measurement system.

Free Cash Flow / Net Cash from Operating Activities Excluding IBM Financing Receivables

The company uses free cash flow as a measure to evaluate its operating results, plan shareholder return levels, strategic investments and assess its ability and need to incur and service debt. The entire free cash flow amount is not necessarily available for discretionary expenditures. The company defines free cash flow as net cash from operating activities less the change in Financing receivables and net capital expenditures, including the investment in software. A key objective of the Financing business is to generate strong returns on equity, and our Financing receivables are the basis for that growth. Accordingly, management considers Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management presents both free cash flow and net cash from operating activities that exclude the effect of Financing receivables. Free cash flow guidance is derived using an estimate of profit, working capital and operational cash flows. Since the company views Financing receivables as a profit-generating investment which it seeks to maximize, it is not considered when formulating guidance for free cash flow. As a result, the company does not estimate a GAAP net cash from operations expectation metric.

Constant Currency

When the company refers to growth rates at constant currency or adjusts such growth rates for currency, it is done so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of its business performance. Financial results adjusted for

currency are calculated by translating current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

XML

Document and Entity Information	Oct. 25, 2023
Document Information [Line Items]
Document Type	8-K
Document Period End Date	Oct. 25, 2023
Entity File Number	1-2360
Entity Registrant Name	INTERNATIONAL BUSINESS MACHINES CORPORATION
Entity Incorporation, State or Country Code	NY
Entity Tax Identification Number	13-0871985
Entity Address, Address Line One	One New Orchard Road
Entity Address, City or Town	Armonk
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10504
City Area Code	914
Local Phone Number	499-1900
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000051143
Amendment Flag	false
NEW YORK STOCK EXCHANGE, INC. | Common Stock
Document Information [Line Items]
Title of 12(b) Security	Capital stock, par value $.20 per share
Trading Symbol	IBM
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.125% Notes due 2024
Document Information [Line Items]
Title of 12(b) Security	1.125% Notes due 2024
Trading Symbol	IBM 24A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 2.875% Notes due 2025
Document Information [Line Items]
Title of 12(b) Security	2.875% Notes due 2025
Trading Symbol	IBM 25A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.950% Notes due 2025
Document Information [Line Items]
Title of 12(b) Security	0.950% Notes due 2025
Trading Symbol	IBM 25B
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.875% Notes due 2025
Document Information [Line Items]
Title of 12(b) Security	0.875% Notes due 2025
Trading Symbol	IBM 25C
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.300% Notes due 2026
Document Information [Line Items]
Title of 12(b) Security	0.300% Notes due 2026
Trading Symbol	IBM 26B
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.250% Notes due 2027
Document Information [Line Items]
Title of 12(b) Security	1.250% Notes due 2027
Trading Symbol	IBM 27B
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 3.375% Notes due 2027
Document Information [Line Items]
Title of 12(b) Security	3.375% Notes due 2027
Trading Symbol	IBM 27F
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.300% Notes due 2028
Document Information [Line Items]
Title of 12(b) Security	0.300% Notes due 2028
Trading Symbol	IBM 28B
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.750% Notes due 2028
Document Information [Line Items]
Title of 12(b) Security	1.750% Notes due 2028
Trading Symbol	IBM 28A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.500% Notes due 2029
Document Information [Line Items]
Title of 12(b) Security	1.500% Notes due 2029
Trading Symbol	IBM 29
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.875% Notes due 2030
Document Information [Line Items]
Title of 12(b) Security	0.875% Notes due 2030
Trading Symbol	IBM 30A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.750% Notes due 2031
Document Information [Line Items]
Title of 12(b) Security	1.750% Notes due 2031
Trading Symbol	IBM 31
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 3.625% Notes due 2031
Document Information [Line Items]
Title of 12(b) Security	3.625% Notes due 2031
Trading Symbol	IBM 31B
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 0.650% Notes due 2032
Document Information [Line Items]
Title of 12(b) Security	0.650% Notes due 2032
Trading Symbol	IBM 32A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.250% Notes due 2034
Document Information [Line Items]
Title of 12(b) Security	1.250% Notes due 2034
Trading Symbol	IBM 34
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 3.750% Notes due 2035
Document Information [Line Items]
Title of 12(b) Security	3.750% Notes due 2035
Trading Symbol	IBM 35
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 4.875% Notes due 2038
Document Information [Line Items]
Title of 12(b) Security	4.875% Notes due 2038
Trading Symbol	IBM 38
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 1.200% Notes due 2040
Document Information [Line Items]
Title of 12(b) Security	1.200% Notes due 2040
Trading Symbol	IBM 40
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 4.000% Notes due 2043
Document Information [Line Items]
Title of 12(b) Security	4.000% Notes due 2043
Trading Symbol	IBM 43
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 7.00% Debentures due 2025
Document Information [Line Items]
Title of 12(b) Security	7.00% Debentures due 2025
Trading Symbol	IBM 25
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 6.22% Debentures due 2027
Document Information [Line Items]
Title of 12(b) Security	6.22% Debentures due 2027
Trading Symbol	IBM 27
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 6.50% Debentures due 2028
Document Information [Line Items]
Title of 12(b) Security	6.50% Debentures due 2028
Trading Symbol	IBM 28
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 5.875% Debentures due 2032
Document Information [Line Items]
Title of 12(b) Security	5.875% Debentures due 2032
Trading Symbol	IBM 32D
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 7.00% Debentures due 2045
Document Information [Line Items]
Title of 12(b) Security	7.00% Debentures due 2045
Trading Symbol	IBM 45
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. | 7.125% Debentures due 2096
Document Information [Line Items]
Title of 12(b) Security	7.125% Debentures due 2096
Trading Symbol	IBM 96
Security Exchange Name	NYSE
NYSE CHICAGO, INC. | Common Stock
Document Information [Line Items]
Title of 12(b) Security	Capital stock, par value $.20 per share
Trading Symbol	IBM
Security Exchange Name	CHX