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: January 22, 2019

(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.)

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 o

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. o

Item 2.02. Results of Operations and Financial Condition.

The registrant’s press release dated January 22, 2019, regarding its financial results for the periods ended December 31, 2018, including consolidated financial statements for the periods ended December 31, 2018, 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 hereby filed.

Item 7.01. Regulation FD Disclosure.

The slides for IBM’s Chief Financial Officer Jim Kavanaugh’s fourth-quarter and full-year 2018 earnings presentation on January 22, 2019 are Exhibit 99.3 to this Form 8-K.

The information in this Item 7.01, including the corresponding Exhibit 99.3, 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 filed as part of this report:

Exhibit No.	Description of Exhibit
99.1	Earnings Release of the Registrant, dated January 22, 2019
99.2	Non-GAAP Financial Information

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

Exhibit No.	Description of Exhibit
99.3	Earnings Presentation of the Registrant, dated January 22, 2019

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: January 22, 2019
	By:	/s/ Robert F. Del Bene
		Robert F. Del Bene
		Vice President and Controller

3

EX-99.1

Exhibit 99.1

IBM REPORTS 2018 FOURTH-QUARTER AND FULL-YEAR RESULTS

Margin Expansion Year to Year in Fourth Quarter; Return to Full-Year Revenue Growth

Highlights

Fourth Quarter:

·GAAP EPS from continuing operations of $2.15

--  Includes charge of $1.9 billion related to the U.S. Tax Cuts and Jobs Act of 2017

·Operating (non-GAAP) EPS of $4.87

·Revenue of $21.8 billion, down 3 percent (down 1 percent adjusting for currency)

--  Global Business Services and Cognitive Solutions revenue grew year to year

·Gross profit margin up 10 basis points year to year; pre-tax income margin up more than 50 basis points year to year

--  Continued strong services gross profit margin expansion year to year

Full Year:

·GAAP EPS from continuing operations of $9.51

--  Includes charge of $2.0 billion related to the U.S. Tax Cuts and Jobs Act of 2017

·Operating (non-GAAP) EPS of $13.81

·Revenue of $79.6 billion, up 1 percent (flat year to year adjusting for currency)

·Strategic imperatives revenue of $39.8 billion, up 9 percent

·Cloud revenue of $19.2 billion, up 12 percent

--  As-a-service annual exit run rate for cloud revenue of $12.2 billion in the quarter, up 18 percentyear to year (up 21 percent adjusting for currency)

2019 Expectations:

·GAAP EPS of at least $12.45; Operating (non-GAAP) EPS of at least $13.90

·Free cash flow of approximately $12 billion

ARMONK, N.Y., January 22, 2019 . . . IBM (NYSE: IBM) today announced fourth-quarter and full-year 2018 earnings results.

“In 2018 we returned to full-year revenue growth, reflecting growing demand for our services and leadership solutions in hybrid cloud, AI, analytics and security,” said Ginni Rometty, IBM chairman, president and chief executive officer.  “Major clients worldwide, such as BNP Paribas, are turning to the IBM Cloud and our unmatched industry expertise to transform their businesses and drive innovation.”

	FOURTH QUARTER 2018
				Pre-tax	Gross
	Diluted	Net	Pre-tax	Income	Profit
	EPS	Income	Income	Margin	Margin
GAAP from Continuing Operations *	$2.15	$2.0B	$4.4B	20.4%	49.1%
Year/Year	289%	286%	-1%	0.6Pts	0.1Pts
Operating (Non-GAAP)	$4.87	$4.4B	$5.0B	23.1%	49.5%
Year/Year	-5%	-8%	-1%	0.5Pts	0.1Pts

* Diluted EPS and Net Income include charges related to the U.S. Tax Cuts and Jobs Act of 2017 of $1.9 billion in the fourth quarter of 2018, and $5.5 billion in the fourth quarter of 2017.

“In the quarter we expanded both gross margin and pre-tax income margin,” said James Kavanaugh, IBM senior vice president and chief financial officer.  “In 2018 we repositioned our business model and delivered revenue, operating profit and EPS growth along with strong free cash flow realization.  We continue to optimize our portfolio for the high-value, emerging segments of our industry, while returning capital to our shareholders.”

Cash Flow and Balance Sheet

In the fourth quarter, the company generated net cash from operating activities of $4.1 billion, or $7.3 billion, excluding Global Financing receivables.  IBM’s free cash flow was $6.5 billion.  IBM returned $3.5 billion to shareholders through $1.4 billion in dividends and $2.0 billion in gross share repurchases.  At the end of December 2018, IBM had $3.3 billion remaining in the current share repurchase authorization.

The company generated full-year free cash flow of $11.9 billion, excluding Global Financing receivables, and returned $10.1 billion to shareholders through $5.7 billion in dividends and $4.4 billion of gross share repurchases.

IBM ended the fourth quarter with $12.2 billion of cash on hand.  Debt totaled $45.8 billion, including Global Financing debt of $31.2 billion.  The balance sheet remains strong and is well positioned for the long term.

Segment Results for Fourth Quarter

·Cognitive Solutions (includes solutions software and transaction processing software) – revenues of $5.5 billion, flat year to year (up 2 percent adjusting for currency), led by growth in solutions software, including analytics and AI.

·Global Business Services (includes consulting, application management and global process services) – revenues of $4.3 billion, up 4 percent (up 6 percent adjusting for currency), with growth across consulting, application management and global process services.  Gross profit margin increased 300 basis points.

·Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) – revenues of $8.9 billion, down 3 percent (flat year to year adjusting for currency), with growth in hybrid cloud revenue.  Gross profit margin increased more than 140 basis points.

·Systems (includes systems hardware and operating systems software) – revenues of $2.6 billion, down 21 percent (down 20 percent adjusting for currency), with growth in Power, offset by the impact of the IBM Z product cycle dynamics.

·Global Financing (includes financing and used equipment sales) – revenues of $402 million, down 11 percent (down 9 percent adjusting for currency).

Tax Rate

As a result of the enactment of the U.S. Tax Cuts and Jobs Act of 2017, IBM recorded charges  of $2.0 billion in 2018, including $1.9 billion in the fourth quarter, primarily related to deferred taxes for the new Global Intangible Low-Taxed Income (GILTI) tax.  This is in addition to the charge of $5.5 billion the company recorded in the fourth quarter of 2017 related to the one-time U.S. transition tax, foreign tax costs on undistributed foreign earnings and the remeasurement of deferred taxes. These charges are included in the GAAP results for the fourth quarter and full year for 2017 and 2018.

IBM’s reported GAAP tax rate, which includes the charge, for the fourth quarter was 56 percent in 2018 compared with 124 percent in 2017; and for the full year was 23 percent compared with 49 percent in 2017.

IBM’s operating (non-GAAP) earnings and tax rate for 2018 exclude the charges. IBM’s reported operating (non-GAAP) tax rate for the fourth quarter was 12 percent in 2018 compared with6 percent in 2017; and for the full year was 8 percent in 2018 compared with 7 percent in 2017.

Full-Year 2018 Results

Consolidated diluted earnings per share from continuing operations was $9.51 compared with $6.14 for 2017, up 55 percent year to year.  Consolidated net income was $8.7 billion, up 52 percent.  Revenues for the full year totaled $79.6 billion, an increase of 1 percent year to year (flat year to year adjusting for currency), compared with $79.1 billion for the full-year 2017.

Operating (non-GAAP) diluted earnings per share from continuing operations was $13.81 compared with $13.66 per diluted share for 2017, an increase of 1 percent.  Operating (non-GAAP) net income for the full year was $12.7 billion compared with $12.8 billion in the year-ago period, a decrease of 1 percent.

Strategic imperatives revenue for the full year was $39.8 billion, up 9 percent.  Full-year cloud revenue was $19.2 billion, up 12 percent, with $11.3 billion delivered as a service and $7.8 billion for cloud-related hardware, software and services to enable IBM clients to implement cloud solutions across public, private and multi-cloud environments.  The annual exit run rate for as-a-service revenue increased in the quarter to $12.2 billion, up 18 percent (up 21 percent adjusting for currency).

	FULL YEAR 2018
				Pre-tax	Gross
	Diluted	Net	Pre-tax	Income	Profit
	EPS	Income	Income	Margin	Margin
GAAP from Continuing Operations *	$9.51	$8.7B	$11.3B	14.3%	46.4%
Year/Year	55%	51%	-1%	-0.2Pts	-0.3Pts
Operating (Non-GAAP)	$13.81	$12.7B	$13.7B	17.3%	46.9%
Year/Year	1%	-1%	0%	-0.1Pts	-0.4Pts

* Diluted EPS and Net Income include charges related to the U.S. Tax Cuts and Jobs Act of 2017 of $2.0 billion in 2018, and $5.5 billion in 2017.

Full-Year 2019 Expectations

The company expects GAAP diluted earnings per share of at least $12.45, and operating (non-GAAP) diluted earnings per share of at least $13.90. Operating (non-GAAP) diluted earnings per share exclude $1.45 per share of charges for: amortization of purchased intangible assets and other acquisition-related charges, including pre-closing charges, such as financing costs, associated with the Red Hat acquisition; retirement-related charges; and tax reform enactment impacts.

IBM expects free cash flow of approximately $12 billion, with a realization rate of approximately 100 percent of GAAP Net Income.

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 the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives; 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; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; 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; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; 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 (SEC) 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.  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 --

·presenting operating (non-GAAP) earnings per share amounts and related income statement items;

·adjusting for free cash flow;

·adjusting for currency (i.e., at constant currency).

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows.  The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore 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.

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. EST, today.  The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q18.html.  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

Ian Colley, 914-434-3043

colley@us.ibm.com

John Bukovinsky, 732-618-3531

jbuko@us.ibm.com

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)

	Three Months Ended			Twelve Months Ended
	December 31,			December 31,
	2018	2017		2018	2017
REVENUE
Cognitive Solutions	$5,455	$5,432		$18,481	$18,453
Global Business Services	4,322	4,152		16,817	16,348
Technology Services & Cloud Platforms	8,929	9,198		34,462	34,277
Systems	2,621	3,332		8,034	8,194
Global Financing	402	450		1,590	1,696
Other	32	(20)		207	171
TOTAL REVENUE	21,760	22,543		79,591	79,139
GROSS PROFIT	10,687	11,049	*	36,936	36,943	*
GROSS PROFIT MARGIN
Cognitive Solutions	79.4%	79.2%	*	77.5%	78.6%	*
Global Business Services	27.6%	24.6%	*	26.7%	24.9%	*
Technology Services & Cloud Platforms	42.3%	40.8%	*	40.5%	40.3%	*
Systems	50.8%	55.7%	*	49.8%	53.2%	*
Global Financing	29.1%	29.5%	*	29.1%	29.3%	*
TOTAL GROSS PROFIT MARGIN	49.1%	49.0%	*	46.4%	46.7%	*
EXPENSE AND OTHER INCOME
S,G&A	4,701	5,013	*	19,366	19,680	*
R,D&E	1,358	1,378	*	5,379	5,590	*
Intellectual property and custom development income	(184)	(348)		(1,026)	(1,466)
Other (income) and expense	185	374	*	1,152	1,125	*
Interest expense	193	164		723	615
TOTAL EXPENSE AND OTHER INCOME	6,253	6,580	*	25,594	25,543	*
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES	4,434	4,469		11,342	11,400
Pre-tax margin	20.4%	19.8%		14.3%	14.4%
Provision for income taxes	2,481	5,522		2,619	5,642
Effective tax rate	55.9%	123.6%		23.1%	49.5%
INCOME / (LOSS) FROM CONTINUING OPERATIONS	$1,954	($1,053)		$8,723	$5,758
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes	(2)	(1)		5	(5)
NET INCOME / (LOSS)	$1,951	($1,054)		$8,728	$5,753
EARNINGS / (LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$2.15	($1.14)		$9.51	$6.14
Discontinued Operations	$0.00	$0.00		$0.01	$0.00
TOTAL	$2.15	($1.14)		$9.52	$6.14
Basic
Continuing Operations	$2.17	($1.14)		$9.56	$6.17
Discontinued Operations	$0.00	$0.00		$0.01	$0.00
TOTAL	$2.17	($1.14)		$9.57	$6.17
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s)
Assuming Dilution	905.2	928.9		916.3	937.4
Basic	901.3	924.5		912.0	932.8

* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

	At	At
(Dollars in Millions)	December 31,	December 31,
	2018	2017
ASSETS:
Current Assets:
Cash and cash equivalents	$11,379	$11,972
Restricted cash	225	262	*
Marketable securities	618	608
Notes and accounts receivable - trade, net	7,432	8,928
Short-term financing receivables, net	22,388	21,721
Other accounts receivable, net	743	981
Inventory	1,682	1,583
Deferred Costs	2,300	1,820	**
Prepaid expenses and other current assets	2,378	1,860	* **
Total Current Assets	49,146	49,735
Property, plant and equipment, net	10,792	11,116
Long-term financing receivables, net	9,148	9,550
Prepaid pension assets	4,666	4,643
Deferred costs	2,676	2,136	**
Deferred taxes	5,216	4,862
Goodwill and intangibles, net	39,353	40,531
Investments and sundry assets	2,386	2,783	**
Total Assets	$123,382	$125,356
LIABILITIES:
Current Liabilities:
Taxes	$3,046	$4,219
Short-term debt	10,207	6,987
Accounts payable	6,558	6,451
Deferred income	11,165	11,552
Other liabilities	7,251	8,153
Total Current Liabilities	38,227	37,363
Long-term debt	35,605	39,837
Retirement related obligations	17,002	16,720
Deferred income	3,445	3,746
Other liabilities	12,174	9,965
Total Liabilities	106,452	107,631
EQUITY:
IBM Stockholders’ Equity:
Common stock	55,151	54,566
Retained earnings	159,206	153,126
Treasury stock -- at cost	(168,071)	(163,507)
Accumulated other comprehensive income/(loss)	(29,490)	(26,592)
Total IBM Stockholders’ Equity	16,796	17,594
Noncontrolling interests	134	131
Total Equity	16,929	17,725
Total Liabilities and Equity	$123,382	$125,356

* Recast to reflect adoption of the FASB guidance on restricted cash.

** Recast to conform to current period presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)

	Three Months Ended			Twelve Months Ended
(Dollars in Millions)	December 31,			December 31,
	2018	2017		2018	2017
Net Cash Provided by Operating Activities per GAAP:	$4,119	$5,733		$15,247	$16,724
Less: change in Global Financing (GF) Receivables	(3,219)	(2,049)		(345)	419
Capital Expenditures, Net	(877)	(965)		(3,716)	(3,312)
Free Cash Flow	6,460	6,817		11,876	12,992
Acquisitions	(16)	(53)		(139)	(496)
Divestitures	-	(240)		-	(205)
Dividends	(1,416)	(1,387)		(5,666)	(5,506)
Share Repurchase	(2,050)	(666)		(4,443)	(4,340)
Non-GF Debt	(2,128)	(840)		(521)	1,056
Other (includes GF Net Receivables and GF Debt)	(3,291)	(2,556)	*	(1,727)	568	*
Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities	($2,440)	$1,074	*	($620)	$4,069	*

* Recast to reflect adoption of the FASB guidance on restricted cash.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)

	Three Months Ended			Twelve Months Ended
(Dollars in Millions)	December 31,			December 31,
	2018	2017		2018	2017
Net Income from Operations	$1,951	($1,054)		$8,728	$5,753
Depreciation/Amortization of Intangibles	1,111	1,150		4,479	4,541
Stock-based Compensation	139	146		510	534
Working Capital / Other	4,135	7,540		1,874	5,476
Global Financing A/R	(3,219)	(2,049)		(345)	419
Net Cash Provided by Operating Activities	$4,119	$5,733		$15,247	$16,724
Capital Expenditures, net of payments & proceeds	(877)	(965)		(3,716)	(3,312)
Divestitures, net of cash transferred	-	(240)		-	(205)
Acquisitions, net of cash acquired	(16)	(53)		(139)	(496)
Marketable Securities / Other Investments, net	1,348	(2,551)	*	(1,058)	(3,068)	*
Net Cash Used in Investing Activities	$455	($3,809)	*	($4,913)	($7,081)	*
Debt, net of payments & proceeds	(1,145)	1,137		(300)	3,446
Dividends	(1,416)	(1,387)		(5,666)	(5,506)
Common Stock Repurchases	(2,050)	(666)		(4,443)	(4,340)
Common Stock Transactions - Other	5	(3)		(60)	(18)
Net Cash Used in Financing Activities	($4,605)	($919)		($10,469)	($6,418)
Effect of Exchange Rate changes on Cash	(95)	62		(495)	937
Net Change in Cash, Cash Equivalents and Restricted Cash	($127)	$1,066	*	($630)	$4,161	*

* Recast to reflect adoption of the FASB guidance on restricted cash.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

	FOURTH - QUARTER 2018
			Technology
		Global	Services &
(Dollars in Millions)	Cognitive	Business	Cloud		Global
	Solutions	Services	Platforms	Systems	Financing
Revenue
External	$5,455	$4,322	$8,929	$2,621	$402
Internal	593	77	245	238	370
Total Segment Revenue	$6,048	$4,398	$9,174	$2,860	$773
Pre-tax Income from Continuing Operations	2,437	566	1,392	551	319
Pre-tax margin	40.3%	12.9%	15.2%	19.3%	41.3%
Change YTY Revenue - External	0.4%	4.1%	(2.9)%	(21.3)%	(10.7)%
Change YTY Revenue - External @constant currency	2.2%	6.5%	0.0%	(20.1)%	(8.6)%

	FOURTH - QUARTER 2017
			Technology
		Global	Services &
(Dollars in Millions)	Cognitive	Business	Cloud		Global
	Solutions	Services	Platforms	Systems	Financing
Revenue
External	$5,432	$4,152	$9,198	$3,332	$450
Internal	646	92	160	179	546
Total Segment Revenue	$6,078	$4,244	$9,358	$3,511	$997
Pre-tax Income from Continuing Operations *	2,273	327	1,441	906	443
Pre-tax margin *	37.4%	7.7%	15.4%	25.8%	44.4%

* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)

	TWELVE - MONTHS 2018
			Technology
		Global	Services &
(Dollars in Millions)	Cognitive	Business	Cloud		Global
	Solutions	Services	Platforms	Systems	Financing
Revenue
External	$18,481	$16,817	$34,462	$8,034	$1,590
Internal	2,715	326	795	815	1,610
Total Segment Revenue	$21,197	$17,143	$35,257	$8,848	$3,200
Pre-tax Income from Continuing Operations	7,154	1,676	3,786	904	1,361
Pre-tax margin	33.8%	9.8%	10.7%	10.2%	42.5%
Change YTY Revenue - External	0.2%	2.9%	0.5%	(2.0)%	(6.3)%
Change YTY Revenue - External @constant currency	(0.4)%	2.0%	(0.1)%	(2.3)%	(6.5)%

	TWELVE - MONTHS 2017
			Technology
		Global	Services &
(Dollars in Millions)	Cognitive	Business	Cloud		Global
	Solutions	Services	Platforms	Systems	Financing
Revenue
External	$18,453	$16,348	$34,277	$8,194	$1,696
Internal	2,647	363	657	750	1,471
Total Segment Revenue	$21,100	$16,711	$34,934	$8,945	$3,168
Pre-tax Income from Continuing Operations *	6,795	1,362	4,286	1,128	1,278
Pre-tax margin *	32.2%	8.2%	12.3%	12.6%	40.3%

* Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)

	FOURTH - QUARTER 2018
	CONTINUING OPERATIONS
		Acquisition-	Retirement-	Tax
		Related	Related	Reform	Operating
	GAAP	Adjustments*	Adjustments**	Impacts	(Non-GAAP)
Gross Profit	$10,687	$89	-	-	$10,776
Gross Profit Margin	49.1%	0.4Pts	-	-	49.5%
S,G&A	4,701	(119)	-	-	4,582
R,D&E	1,358	-	-	-	1,358
Other (Income) & Expense	185	(1)	(387)	-	(203)
Total Expense & Other (Income)	6,253	(119)	(387)	-	5,746
Pre-tax Income from Continuing Operations	4,434	208	387	-	5,030
Pre-tax Income Margin from Continuing Operations	20.4%	1.0Pts	1.8Pts	-	23.1%
Provision for Income Taxes***	2,481	37	39	(1,944)	613
Effective Tax Rate	55.9%	(1.6)Pts	(3.5)Pts	(38.7)Pts	12.2%
Income from Continuing Operations	1,954	171	348	1,944	4,417
Income Margin from Continuing Operations	9.0%	0.8Pts	1.6Pts	8.9Pts	20.3%
Diluted Earnings Per Share: Continuing Operations	$2.15	$0.19	$0.38	$2.15	$4.87

	FOURTH - QUARTER 2017
	CONTINUING OPERATIONS
		Acquisition-	Retirement-	Tax
		Related	Related	Reform	Operating
	GAAP (1)	Adjustments*	Adjustments (1) **	Impacts	(Non-GAAP) (1)
Gross Profit	$11,049	$99	-	-	$11,149
Gross Profit Margin	49.0%	0.4Pts	-	-	49.5%
S,G&A	5,013	(116)	-	-	4,897
R,D&E	1,378	-	-	-	1,378
Other (Income) & Expense	374	(32)	(371)	-	(30)
Total Expense & Other (Income)	6,580	(148)	(371)	-	6,061
Pre-tax Income from Continuing Operations	4,469	247	371	-	5,087
Pre-tax Income Margin from Continuing Operations	19.8%	1.1Pts	1.6Pts	-	22.6%
Provision for Income Taxes***	5,522	67	197	(5,475)	310
Effective Tax Rate	123.6%	(4.7)Pts	(5.1)Pts	(107.6)Pts	6.1%
Income / (Loss) from Continuing Operations	(1,053)	181	174	5,475	4,777
Income / (Loss) Margin from Continuing Operations	(4.7)%	0.8Pts	0.8Pts	24.3Pts	21.2%
Diluted Earnings / (Loss) Per Share: Continuing Operations	($1.14)	$0.19	$0.19	$5.90	$5.14

(1) Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.

*   Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

**  Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, amortization of prior service cost and insolvency insurance.

*** 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.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)

	TWELVE - MONTHS 2018
	CONTINUING OPERATIONS
		Acquisition-	Retirement-	Tax
		Related	Related	Reform	Operating
	GAAP	Adjustments*	Adjustments**	Impacts	(Non-GAAP)
Gross Profit	$36,936	$372	-	-	$37,307
Gross Profit Margin	46.4%	0.5Pts	-	-	46.9%
S,G&A	19,366	(451)	-	-	18,915
R,D&E	5,379	-	-	-	5,379
Other (Income) & Expense	1,152	(2)	(1,572)	-	(422)
Total Expense & Other (Income)	25,594	(453)	(1,572)	-	23,569
Pre-tax Income from Continuing Operations	11,342	824	1,572	-	13,739
Pre-tax Income Margin from Continuing Operations	14.3%	1.0Pts	2.0Pts	-	17.3%
Provision for Income Taxes***	2,619	176	324	(2,037)	1,082
Effective Tax Rate	23.1%	(0.1)Pts	(0.3)Pts	(14.8)Pts	7.9%
Income from Continuing Operations	8,723	649	1,248	2,037	12,657
Income Margin from Continuing Operations	11.0%	0.8Pts	1.6Pts	2.6Pts	15.9%
Diluted Earnings Per Share: Continuing Operations	$9.51	$0.71	$1.36	$2.23	$13.81

	TWELVE - MONTHS 2017
	CONTINUING OPERATIONS
		Acquisition-	Retirement-	Tax
		Related	Related	Reform	Operating
	GAAP (1)	Adjustments*	Adjustments (1) **	Impacts	(Non-GAAP) (1)
Gross Profit	$36,943	$449	-	-	$37,392
Gross Profit Margin	46.7%	0.6Pts	-	-	47.2%
S,G&A	19,680	(509)	-	-	19,170
R,D&E	5,590	-	-	-	5,590
Other (Income) & Expense	1,125	(39)	(1,341)	-	(255)
Total Expense & Other (Income)	25,543	(548)	(1,341)	-	23,654
Pre-Tax Income from Continuing Operations	11,400	997	1,341	-	13,738
Pre-tax Income Margin from Continuing Operations	14.4%	1.3Pts	1.7Pts	-	17.4%
Provision for Income Taxes***	5,642	279	485	(5,475)	931
Effective Tax Rate	49.5%	(1.6)Pts	(1.3)Pts	(39.9)Pts	6.8%
Income from Continuing Operations	5,758	718	856	5,475	12,807
Income Margin from Continuing Operations	7.3%	0.9Pts	1.1Pts	6.9Pts	16.2%
Diluted Earnings Per Share: Continuing Operations	$6.14	$0.77	$0.91	$5.84	$13.66

(1) Recast to reflect adoption of the FASB guidance on presentation of net postretirement benefit cost.

*   Includes amortization of purchased intangible assets, in process R&D, severance cost for acquired employees, vacant space for acquired companies, deal costs and acquisition integration tax charges.

**  Includes retirement-related interest cost, expected return on plan assets, recognized actuarial losses or gains, amortization of transition assets, other settlements, curtailments, amortization of prior service cost and insolvency insurance.

*** 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.

INTERNATIONAL BUSINESS MACHINES CORPORATION

RECONCILIATION OF OPERATING EARNINGS PER SHARE

(Unaudited)

	2019
EPS Guidance	Expectations
GAAP Diluted EPS	at least $12.45
Operating EPS (non-GAAP)	at least $13.90
Adjustments
Acquisition-related Charges *	$0.91
Non-Operating Retirement-Related Items	$0.45
Tax Reform Enactment Impacts	$0.09

* Includes acquisitions as of December 31, 2018, and pre-closing charges,such as financing costs, associated with the Red Hat acquisition

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, 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, and discontinued operations 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 2017 and all 2018 adjustments to that charge as non-operating. Adjustments include true-ups, accounting elections, any changes to regulations, laws, audit adjustments, etc., that affect the recorded one-time charge. For acquisitions, operating (non-GAAP) earnings excludes the amortization of purchased intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable restructuring and related expenses, tax charges related to acquisition integration and pre-closing charges. For the 2019 Operating (non-GAAP) earnings per share expectation, acquisition-related charges associated with the Red Hat acquisition excludes 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 dependent on 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. 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 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 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. The company’s reportable segment financial results reflect operating earnings from continuing operations, consistent with the company’s management and measurement system.

Free Cash Flow

The company uses free cash flow as a measure to evaluate its operating results, plan share repurchase 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 Global Financing receivables and net capital expenditures, including the investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and increasing receivables is the basis for growth. Accordingly, management considers Global Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management includes presentations of both free cash flow and net cash from operating activities that exclude the effect of Global Financing receivables. Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. Since the company views Global 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.

EX-99.3

Exhibit 99.3

IBM 4Q 2018 Earnings January 22, 2019 ibm.com/investor

Forward Looking Statements and Non-GAAP Information 2 Certain comments made in this presentation may be characterized as forward looking under 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. Those statements by their nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company’s filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together. In an effort to provide additional and useful information regarding the company’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and earnings presentation materials, certain non-GAAP information including “operating earnings” and other “operating” financial measures. The rationale for management’s use of this non-GAAP information is included as Exhibit 99.2 to the company’s Form 8-K submitted to the SEC on January 22, 2019. The reconciliation of non-GAAP information to GAAP is included on the slides entitled “Non-GAAP Supplemental Materials” in this presentation. For other related information please visit the Company’s investor relations web site at: http://www.ibm.com/investor/events/earnings/4q18.html

Overview 3 4Q18 FY18 $21.8B $79.6B Revenue $ 4.87 $13.81 Operating EPS $11.9B Free Cash Flow y Full year performance reflects growth in revenue, operating pre-tax income, and operating earnings per share Continued growth in high value offerings that address hybrid cloud and analytics/AI y - - - Strong software performance with growth across Cognitive Solutions and Integration Software Services revenue growth and margin expansion led by consulting Cloud driven by as-a-Service growth of 21% @cc in the fourth quarter y Improved margin performance throughout the year; expanded gross and pre-tax margin in the fourth quarter Announced Red Hat acquisition to accelerate leadership in hybrid cloud y

Key Financial Metrics 4 • • • • Revenue growth in software and services, offset by IBM Z product cycle (3 point impact) Gross and pre-tax margin expansion, led by services Net income and operating earnings per share reflects yr/yr tax headwinds Free cash flow performance supports investment and shareholder returns B/(W) B/(W) Revenue growth rates @CC, $ in billions except for EPS Cash Highlights 4Q18 FY Free Cash Flow (excl. GF Receivables) $6.5 $11.9 Share Repurchase (Gross) $2.0 $4.4 Dividends $1.4 $5.7 Cash Balance @ Dec 31 $12.2 P&L Highlights 4Q18 Yr/Yr Revenue $21.8 (1%) Cognitive Solutions 2% Global Business Services 6% Technology Svcs & Cloud Platforms Flat Systems (20%) GP - Operating $10.8 (3%) Expense - Operating $5.7 5% PTI - Operating $5.0 (1%) NI - Operating $4.4 (8%) EPS - Operating $4.87 (5%) P&L Ratios (Operating) 4Q18 Yr/Yr GP Margin 49.5% 0.1 pts Expense E/R 26.4% 0.5 pts PTI Margin 23.1% 0.5 pts Tax Rate 12.2% (6.1 pts) NI Margin 20.3% (0.9 pts)

Cognitive Solutions Segment 5 Segment Revenue Elements Solutions Software +3% Yr/Yr Transaction Processing Software +1% Yr/Yr Highlights • • Solutions Software growth led by analytics and AI offerings Transaction Processing Software growth reflects clients’ long-term commitment to our platform Pre-tax margin expansion driven by revenue growth, operating efficiencies, and mix Announced divestiture of select products, improves revenue profile over time • • Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue within Cognitive Solutions 4Q18 Yr/Yr Strategic Imperatives $3.7 9% Cloud $0.7 5% as-a-Service annual run rate $2.0 Segment Results 4Q18 Yr/Yr Revenue (External) $5.5 2% PTI $2.4 7% PTI Margin 40.3% 2.9 pts

Global Business Services Segment 6 Segment Revenue Elements Consulting +10% Yr/Yr Application Management +4% Yr/Yr Global Process Services +5% Yr/Yr Highlights • Strong revenue performance, with growth across all three business areas Consulting growth driven by Digital Strategy, CRM, and next generation Enterprise Application offerings Gross margin expansion driven by operating leverage, mix to higher value offerings and productivity • • Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue within Global Business Services 4Q18 Yr/Yr Strategic Imperatives $2.9 14% Cloud $1.4 34% as-a-Service annual run rate $2.1 Segment Results 4Q18 Yr/Yr Revenue (External) $4.3 6% Gross Margin (External) 27.6% 3.0 pts PTI $0.6 73% PTI Margin 12.9% 5.2 pts

Technology Services and Cloud Platforms Segment 7 Segment Revenue Elements Infrastructure Services Flat Yr/Yr Integration Software +4% Yr/Yr Technical Support Services (3%) Yr/Yr Highlights • Continued momentum in hybrid cloud with signings growth and increased adoption of IBM Cloud Private Gross margin expansion driven by productivity Continued investment to capture hybrid cloud opportunity • • Revenue growth rates @CC, $ in billions Strategic Imperatives Revenue within Technology Svcs & Cloud Platforms 4Q18 Yr/Yr Strategic Imperatives $3.2 13% Cloud $2.4 22% as-a-Service annual run rate $8.0 Segment Results 4Q18 Yr/Yr Revenue (External) $8.9 Flat Gross Margin (External) 42.3% 1.5 pts PTI $1.4 (3%) PTI Margin 15.2% (0.2 pts)

Systems Segment 8 Segment Revenue Elements Systems Hardware (23%) Yr/Yr Operating Systems Software (3%) Yr/Yr Highlights Strategic Imperatives Revenue within Systems • IBM Z performance reflects expected wrap on robust 4Q17, continued strong demand for new workloads Power strength driven by POWER9 adoption Margin dynamics reflect mix headwind from IBM Z Strategic Imperatives • • Cloud Revenue growth rates @CC, $ in billions 4Q18 Yr/Yr $1.6 (22%) $1.1 (31%) Segment Results 4Q18 Yr/Yr Revenue (External) $2.6 (20%) PTI $0.6 (39%) PTI Margin 19.3% (6.5 pts)

Cash Flow and Balance Sheet Highlights 9 • Full-year free cash flow performance reflects expected yr/yr headwinds in capex, working capital, and cash tax Committed to continued dividend increases Free cash flow realization ~111%** for the year • • • Positioned to support business over the longer term Committed to strong investment grade credit rating Pension plans remain well-funded • • $ in billions *Excludes Global Financing receivables **Adjusted for the charges associated with enactment of U.S. tax reform ***Reflects adoption of the FASB guidance on restricted cash, Dec 17 recast Cash Flow 4Q18 Yr/Yr FY Net Cash from Operations* $7.3 ($0.4) $15.6 Free Cash Flow* $6.5 ($0.4) $11.9 Selected Uses of Cash Net Capital Expenditures $0.9 $3.7 Acquisitions $0.0 $0.1 Dividends/Share Repurchase $3.5 $10.1 Balance Sheet Dec 18 Dec 17 Cash & Marketable Securities*** $12.2 $12.8 Total Debt $45.8 $46.8 Global Financing Debt $31.2 $31.4 Global Financing Leverage 9.0 9.0 Non-GF Debt $14.6 $15.4

Operating Earnings per Share Drivers – FY17 to FY18 10 0.35 (0.53) 0.30 (0.05) 0.07 13.81 13.66 FY17 Revenue @Actual Pre-Tax Margin Tax Shares Significant Items* (1Q only) FY18 • Full year performance reflects growth in revenue, operating pre-tax income, and operating earnings per share, with margin expansion in the second half * Significant Items includes tax discretes and pre-tax charges as presented in 1Q18 earnings webcast 4Q17 4Q18 5.14 (0.16) 0.11 (0.34) 0.12 4.87 +1% PTI (0.41) Tax 0.35 Operating Leverage

Summary 11 • Full year performance reflects growth in revenue, operating pre-tax income, and operating earnings per share, with solid free cash flow realization - - - - Continued momentum in Global Business Services Strong finish in software Successful IBM Z and Power programs Operating leverage and productivity drove margin expansion • Executing strategic investments and disciplined portfolio management - - IBM + Red Hat creates leading hybrid cloud provider Software and services divestitures improve revenue profile going forward and support shift to higher value • Expect at least $13.90 of operating per share, and approximately $12 billion of free cash flow for 2019

12 ibm.com/investor

Supplemental Materials 13 • • • • • • • • • • Currency – Impact on Revenue Growth Divested Businesses – 2019 Implications Strategic Imperatives Revenue Geographic Revenue Segment Revenue & Gross Profit Additional Revenue & Backlog Information Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) • • Key Financial Metrics – FY 2018 Strategic Imperatives & Geographic Revenue – FY 2018 Segment Revenue & Gross Profit – FY 2018 Expense Summary – FY 2018 Retirement–Related Summary Non-GAAP Supplemental Materials • • • • Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding

Currency – Impact on Revenue Growth 14 US$B $21.8 Yr/Yr (3%) Revenue As Reported Currency Impact ($0.5) (2 pts) Revenue @ CC (1%) Supplemental Materials Quarterly Averages per US $ 3Q18 Yr/Yr 4Q18 Yr/Yr 1/18/2019 Spot 1Q19 2Q19 3Q19 4Q19 FY19 Euro 0.86 (1%) 0.88 (3%) 0.88 (8%) (5%) (2%) 0% (4%) Pound 0.77 0% 0.78 (3%) 0.77 (8%) (5%) (1%) 0% (3%) Yen111 0% 113 0% 110 (1%) (0%) 2% 3% 1% Revenue Impact, Future @ 1/18/19 Spot(2 pts) (2.3 pts) ~(4 pts) ~(2 pts) (0-1 pts) 0-1 pts (1-2 pts)

Divested Businesses - 2019 Implications 15 • Announced divestiture of collaboration and on-premise marketing and commerce software, and Seterus mortgage servicing business Improves revenue and profit profile over the longer term - 2019 expectations include a headwind to revenue and free cash flow, and minimal impact to profit and earnings per share • 1Q 2Q 3Q 4Q FY 2018 Reven u e Bas e $0.4 $0.4 $0.4 $0.4 $1.5 Select Software (Solutions SW) Seterus (Global Process Svcs) 0.3 0.06 0.3 0.06 0.3 0.05 0.3 0.05 1.3 0.2 Revenue Growth Profit & EPS Free Cash Flow Foregone profit Stranded costs Gain/Loss on Sale Charges to address stranded costs Savings from actions $ in billions; * assumes divestiture of select software products closes mid-2019, Seterus closes 1Q19 Supplemental Materials 2019 Implications * ~(1 pt) ~neutral negative - - + - + - - not included - +

Strategic Imperatives Revenue 16 Excluding IBM Z • Strategic imperatives revenue of $39.8 billion in 2018, half of IBM revenue • Strategic imperatives revenue growth impacted by IBM Z cycle; double-digit growth across analytics, cloud, and security excluding IBM Z • Continued strong growth in cloud revenue delivered as-a-Service • Analytics growth across software and GBS, as clients leverage data for competitive advantage Revenue growth rates @CC, $ in billions Overlap in Strategic Imperatives revenue primarily reflects solutions delivered via cloud Supplemental Materials 4Q18 Yr/Yr Yr/Yr Total Strategic Imperatives $11.5 5% 11% Analytics $6.4 8% 11% Cloud $5.7 6% 19% aaS annual run rate $12.2 21% 21% Mobile $1.2 (7%) (7%) Security $1.4 (3%) 17% Social $0.2 (7%) (7%)

Geographic Revenue 17 • Americas reflects strong growth in Latin America offset by a decline in the US, reflecting IBM Z cycle dynamics • E/ME/A accelerated to 2% growth, led by Germany, UK, Spain, and Italy • Asia Pacific yr/yr performance consistent with 3Q18, with 5% growth in Japan Revenue growth rates @CC, $ in billions Supplemental Materials Geography Revenue 4Q18 Yr/Yr Americas $10.2 (4%) Europe/ME/Africa $7.1 2% Asia Pacific $4.5 (1%)

Segment Revenue & Gross Profit 18 Segment Revenue & Gross Profit Metrics - 4Q18 Cognitive Solutions Global Business Services Technology Services & Cloud Platforms Systems Global Financing Revenue growth rates @CC, $ in billions Supplemental Materials 4Q18 Revenue Yr/Yr 4Q18 GP% Yr/Yr $5.5 2% 79.4% 0.2 pts Solutions Software $3.8 3% Transaction Processing Software $1.6 1% $4.3 6% 27.6% 3.0 pts Consulting $2.0 10% Global Process Services $0.3 5% Application Management $2.0 4% $8.9 Flat 42.3% 1.5 pts Global Technology Services $7.5 (1%) 34.9% 1.5 pts Infrastructure Services $5.8 Flat Technical Support Services $1.7 (3%) Integration Software $1.4 4% 82.1% (1.2 pts) $2.6 (20%) 50.8% (4.9 pts) Systems Hardware $2.2 (23%) 43.6% (7.5 pts) Operating Systems Software $0.4 (3%) 86.2% 1.6 pts $0.4 (9%) 29.1% (0.3 pts)

Additional Revenue & Backlog Information 19 IBM Z (44%) Power 10% Backlog Yr/Yr @Actual (4%) Storage (7%) Growth rates @CC, $ in billions, Services Backlog calculated using December 31 currency spot rates Supplemental Materials 4Q18 Yr/Yr Signings $15.8 21% Services Backlog $116 (1%) 4Q18 Yr/Yr Systems Hardware Revenue $2.2 (23%)

Expense Summary 20 • • • Yr/yr performance reflects operational efficiencies in SG&A and RD&E, mitigated by lower level of IP income Continued to invest in high growth opportunities Currency reflects translation and yr/yr hedging benefits, which mitigate currency impacts through P&L $ in billions *includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges **represents the percentage change after excluding the impact of currency and acquisitions Supplemental Materials B/(W) Currency Acq.* Base** Expense Metrics 4Q18 Yr/Yr SG&A – Operating $4.6 6% 3 pts 0 pts 4 pts RD&E $1.4 1% 1 pts 0 pts 0 pts IP and Custom Development Income ($0.2) (47%) Other (Income)/Expense - Operating ($0.2) NM Interest Expense $0.2 (18%) Operating Expense & Other Income $5.7 5% 5 pts 0 pts 1 pts

Balance Sheet Summary 21 $ in billions *Reflects adoption of the FASB guidance on restricted cash, Dec 17 recast **includes eliminations of inter-company activity Supplemental Materials Dec 18 Dec 17 Cash & Marketable Securities* $12.2 $12.8 Non-GF Assets*, ** $71.7 $74.2 Global Financing Assets* $39.5 $38.3 Total Assets $123.4 $125.4 Other Liabilities $60.6 $60.8 Non-GF Debt** $14.6 $15.4 Global Financing Debt $31.2 $31.4 Total Debt $45.8 $46.8 Total Liabilities $106.5 $107.6 Equity $16.9 $17.7 Global Financing Leverage 9.0 9.0

Cash Flow Summary 22 $ in billions *Reflects adoption of the FASB guidance on restricted cash, 2017 recast Supplemental Materials B/(W) B/(W) FY18Yr/Yr 4Q18 Yr/Yr Net Cash from Operations $4.1 ($1.6) $15.2 ($1.5) Less: Global Financing Receivables ($3.2) ($1.2) ($0.3) ($0.8) Net Cash from Operations (excluding GF Receivables) $7.3 ($0.4) $15.6 ($0.7) Net Capital Expenditures ($0.9) $0.1 ($3.7) ($0.4) Free Cash Flow (excluding GF Receivables) $6.5 ($0.4) $11.9 ($1.1) Acquisitions ($0.0) $0.0 ($0.1) $0.4 Divestitures $0.0 $0.2 $0.0 $0.2 Dividends ($1.4) ($0.0) ($5.7) ($0.2) Share Repurchases (Gross) ($2.0) ($1.4) ($4.4) ($0.1) Non-GF Debt ($2.1) ($1.3) ($0.5) ($1.6) Other (includes GF Net A/R & GF Debt)* ($3.3) ($0.7) ($1.7) ($2.3) Change in Cash & Marketable Securities* ($2.4) ($3.5) ($0.6) ($4.7)

Cash Flow (ASC 230) 23 FY18 FY17 $ in billions *Reflects adoption of the FASB guidance on restricted cash, 4Q17 & FY17 recast Supplemental Materials 4Q18 4Q17 Net Income from Operations $2.0 ($1.1) $8.7 $5.8 Depreciation / Amortization of Intangibles $1.1 $1.1 $4.5 $4.5 Stock-based Compensation $0.1 $0.1 $0.5 $0.5 Working Capital / Other $4.1 $7.5 $1.9 $5.5 Global Financing A/R ($3.2) ($2.0) ($0.3) $0.4 Net Cash provided by Operating Activities $4.1 $5.7 $15.2 $16.7 Capital Expenditures, net of payments & proceeds ($0.9) ($1.0) ($3.7) ($3.3) Divestitures, net of cash transferred $0.0 ($0.2) $0.0 ($0.2) Acquisitions, net of cash acquired ($0.0) ($0.1) ($0.1) ($0.5) Marketable Securities / Other Investments, net* $1.3 ($2.6) ($1.1) ($3.1) Net Cash used in Investing Activities* $0.5 ($3.8) ($4.9) ($7.1) Debt, net of payments & proceeds ($1.1) $1.1 ($0.3) $3.4 Dividends ($1.4) ($1.4) ($5.7) ($5.5) Common Stock Repurchases ($2.0) ($0.7) ($4.4) ($4.3) Common Stock Transactions - Other $0.0 ($0.0) ($0.1) ($0.0) Net Cash used in Financing Activities ($4.6) ($0.9) ($10.5) ($6.4) Effect of Exchange Rate changes on Cash ($0.1) $0.1 ($0.5) $0.9 Net Change in Cash & Cash Equivalents* ($0.1) $1.1 ($0.6) $4.2

Key Financial Metrics – FY 2018 24 B/(W) B/(W) Revenue growth rates @CC, $ in billions except for EPS Supplemental Materials Cash Highlights 4Q18 FY Free Cash Flow (excl. GF Receivables) $6.5 $11.9 Share Repurchase (Gross) $2.0 $4.4 Dividends $1.4 $5.7 Cash Balance @ Dec 31 $12.2 P&L Highlights FY18 Yr/Yr Revenue $79.6 Flat Cognitive Solutions Flat Global Business Services 2% Technology Svcs & Cloud Platforms Flat Systems (2%) GP - Operating $37.3 Flat Expense - Operating $23.6 Flat PTI - Operating $13.7 Flat NI - Operating $12.7 (1%) EPS - Operating $13.81 1% P&L Ratios (Operating) FY18 Yr/Yr GP Margin 46.9% (0.4 pts) Expense E/R 29.6% 0.3 pts PTI Margin 17.3% (0.1 pts) Tax Rate 7.9% (1.1 pts) NI Margin 15.9% (0.3 pts)

Strategic Imperatives & Geographic Revenue – FY 2018 25 Excluding IBM Z Revenue growth rates @CC, $ in billions Overlap in Strategic Imperatives revenue primarily reflects solutions delivered via cloud Supplemental Materials FY18 Yr/Yr Yr/Yr Total Strategic Imperatives $39.8 9% 9% Analytics $21.7 5% 5% Cloud $19.2 12% 15% aaS annual run rate Mobile $5.0 3% 3% Security $4.1 28% 12% Social $0.8 (15%) (15%) FY18 Yr/Yr Geography Revenue Americas $37.0 (1%) Europe/ME/Africa $25.5 1% Asia Pacific $17.1 Flat

Segment Revenue & Gross Profit – FY 2018 26 Revenue growth rates @CC, $ in billions Supplemental Materials Segment Revenue & Gross Profit Metrics - FY18 FY18 Revenue Yr/Yr FY18 GP% Yr/Yr Cognitive Solutions $18.5 Flat 77.5% (1.1 pts) Solutions Software $12.9 Flat Transaction Processing Software $5.6 (2%) Global Business Services $16.8 2% 26.7% 1.7 pts Consulting $7.7 5% Global Process Services $1.3 (1%) Application Management $7.9 (1%) Technology Services & Cloud Platforms $34.5 Flat 40.5% 0.2 pts Global Technology Services $30.0 Flat 34.4% 0.2 pts Infrastructure Services $23.0 1% Technical Support Services $7.0 (3%) Integration Software $4.5 2% 81.3% (0.4 pts) Systems $8.0 (2%) 49.8% (3.4 pts) Systems Hardware $6.4 (2%) 40.7% (3.8 pts) Operating Systems Software $1.7 (2%) 84.5% (1.9 pts) Global Financing $1.6 (7%) 29.1% (0.2 pts)

Expense Summary – FY 2018 27 $ in billions *includes acquisitions made in the last twelve months, net of non-operating acquisition-related charges **represents the percentage change after excluding the impact of currency and acquisitions Supplemental Materials B/(W) Currency Acq.* Base** Expense Metrics FY18 Yr/Yr SG&A – Operating $18.9 1% 0 pts 0 pts 2 pts RD&E $5.4 4% 0 pts 0 pts 4 pts IP and Custom Development Income ($1.0) (30%) Other (Income)/Expense - Operating ($0.4) 65% Interest Expense $0.7 (18%) Operating Expense & Other Income $23.6 Flat 0 pts 0 pts 0 pts

Retirement-Related Summary 28 Expected 2019 Key Assumptions and Metrics 2017 2018 2019 Cost and Contributions 2018 Funded Status at Year-end* Operating Cost $1.5 $1.5 US 104% 104% Non-operating Cost** $1.6 $0.6 WW 100% 99% Total Cost $3.1 $2.0 D i s cou n t Ra t e a t Yea r-en d Contributions*** $2.3 $2.4 US 3.4% 4.1% WW 2.6% 3.0% Expected ROA at Prior Year-end US 5.8% 5.3% 5.3% WW 4.9% 4.5% 4.9% Actual ROA US 9.6% (1.8%) WW 8.3% (1.9%) $ in billions *Tax Qualified Defined Benefit Plans **2019 non-operating cost reflects ~$900 million reduction due to change in amortization period for actuarial losses in US defined benefit pension plans; no changes to operating results or free cash flow; will reduce FCF realization as a percent of GAAP net income ***includes cash and non-cash contributions Supplemental Materials

Non-GAAP Supplemental Materials Reconciliation of Operating Earnings Per Share 29 2019 Expectations GAAP Diluted EPS at least $12.45 Operating EPS (Non-GAAP) at least $13.90 Adjustments Acquisition-Related Charges* $0.91 Non-Operating Retirement-Related Items $0.45 Tax Reform Enactment Impacts $0.09 *Includes acquisitions as of December 31, 2018, and pre-closing charges such as financing costs, associated with the Red Hat acquisition The above reconciles the Non-GAAP financial information contained in the “Summary” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 4Q & FY 2018 30 The above reconciles the Non-GAAP financial information contained in the “Geographic Revenue” and “Strategic Imperatives & Geographic Revenue – FY 2018” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 4Q18 Yr/Yr GAAP@CC FY18 Yr/Yr GAAP@CC Americas (5%) (4%) (2%) (1%) Europe/ME/Africa(1%) 2% 4% 1% Asia Pacific (3%) (1%) Flat Flat Japan 6% 5% 3% 1%

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 4Q & FY 2018 31 The above reconciles the Non-GAAP financial information contained in the “Strategic Imperatives Revenue” and “Strategic Imperatives and Geographic Revenue – FY 2018” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 4Q18 Yr/Yr GAAP@CC FY18 Yr/Yr GAAP@CC Strategic Imperatives 3% 5% 9% 9% Analytics 6% 8% 5% 5% Cloud 3% 6% 12% 12% aaS annual run rate 18% 21% Mobile (9%) (7%) 4% 3% Security(4%) (3%) 29% 28% Social(8%) (7%) (14%) (15%)

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 4Q & FY 2018 32 The above reconciles the Non-GAAP financial information contained in the “Strategic Imperatives Revenue” and “Strategic Imperatives and Geographic Revenue – FY 2018” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials Excluding IBM Z 4Q18 Yr/Yr GAAP@CC Excluding IBM Z FY18 Yr/Yr GAAP@CC Strategic Imperatives9% 11% 9% 9% Analytics 9% 11% 6% 5% Cloud 15% 19% 16% 15% aaS annual run rate 18% 21% Mobile (9%) (7%) 4% 3% Security15% 17% 13% 12% Social(8%) (7%) (14%) (15%)

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 4Q 2018 4Q18 Yr/Yr 33 4Q18 Yr/Yr GAAP @CC GAAP @CC C ognitive Sol utions Fl at 2% T ech Svcs & C l oud Pl atfor m s (3%) Fl at Solutions Software 1% 3% Global Technology Services (4%) (1%) Transaction Processing Software (1%) 1% Infrastructure Services (3%) Flat Strategic Imperatives 7% 9% Technical Support Services (6%) (3%) Cloud 4% 5% Integration Software 2% 4% Gl obal Business Ser vices 4% 6% Strategic Imperatives 10% 13% Consulting 7% 10% Cloud 19% 22% Global Process Services 2% 5% System s (21%) (20%) Application Management 1% 4% Systems Hardware (24%) (23%) Strategic Imperatives 11% 14% IBM Z (45%) (44%) Cloud 30% 34% Power 9% 10% Storage (8%) (7%) Operating Systems Software (4%) (3%) Strategic Imperatives (23%) (22%) Cloud (32%) (31%) Gl obal Financing (11%) (9%) The above reconciles the Non-GAAP financial information contained in the “Segment Revenue & Gross Profit”, “Additional Revenue & Backlog Information”, “Cognitive Solutions Segment”, “Global Business Services Segment”, “Technology Services & Cloud Platforms Segment”, and “Systems Segment” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - FY 2018 FY18 Yr/Yr GAAP @CC 34 C og nitiv e S ol utions Fl a t Fl a t Solutions Software 1% Flat Transaction Processing Software (1%) (2%) G l ob a l Bus ines s S er v ices 3 % 2 % Consulting 6% 5% Global Process Services Flat (1%) Application Management Flat (1%) T echnol og y S er v ices & C l oud Pl a tf or m s 1 % Fl a t Global Technology Services Flat Flat Infrastructure Services 1% 1% Technical Support Services (3%) (3%) Integration Software 2% 2% System s (2%) (2%) Systems Hardware (2%) (2%) Operating Systems Software (2%) (2%) Gl obal Financing (6%) (7%) The above reconciles the Non-GAAP financial information contained in the “Segment Revenue & Gross Profit – FY 2018” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials

Non-GAAP Supplemental Materials Reconciliation of Revenue Growth - 4Q 2018 35 4Q18 Yr/Yr GAAP @CC Total Services Revenue (1%) 2% Total Software Revenue Flat 2% The above reconciles the Non-GAAP financial information contained in the “4Q18 Prepared Remarks” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials

Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 4Q & FY 2018 36 4Q18 FY18 The above reconciles the Non-GAAP financial information contained in the “Expense Summary” and “ Expense Summary – FY 2018” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. *Represents the percentage change after excluding the impact of currency and acquisitions. Supplemental Materials Non-GAAPOperating GAAPAdjustments (Non-GAAP) Non-GAAPOperating GAAPAdjustments (Non-GAAP) SG&A Currency 3 pts 0 pts 3 pts 0 pts 0 pts 0 pts Acquisitions 0 pts 0 pts 0 pts 0 pts 0 pts 0 pts Base * 4 pts 0 pts 4 pts 2 pts 0 pts 2 pts RD &E Currency 1 pts 0 pts 1 pts 0 pts 0 pts 0 pts Acquisitions 0 pts 0 pts 0 pts 0 pts 0 pts 0 pts Base * 0 pts 0 pts 0 pts 4 pts 0 pts 4 pts Oper ating Expense & Other Incom e Currency 4 pts 0 pts 5 pts 0 pts 0 pts 0 pts Acquisitions 0 pts 0 pts 0 pts 0 pts 0 pts 0 pts Base* 1 pts 0 pts 1 pts 0 pts 1 pts 0 pts

Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow Realization - FY 2018 37 FY Excluding Tax Reform* FY Free Cash Flow Realization 136% ~111% The above reconciles the Non-GAAP financial information contained in the “Cash Flow and Balance Sheet Highlights” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the Company’s Form 8-K dated January 22, 2019 for additional information on the use of these Non-GAAP financial measures. * Adjusted for the charges associated with enactment of U.S. tax reform Supplemental Materials

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