INTERNATIONAL BUSINESS MACHINES CORP (Form: 8-K, Received: 04/20/2020 16:16:56)

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: April 20, 2020

(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
2.750% Notes due 2020	IBM 20B	New York Stock Exchange
1.875% Notes due 2020	IBM 20A	New York Stock Exchange
0.500% Notes due 2021	IBM 21B	New York Stock Exchange
2.625% Notes due 2022	IBM 22A	New York Stock Exchange
1.250% Notes due 2023	IBM 23A	New York Stock Exchange
0.375% Notes due 2023	IBM 23B	New York Stock Exchange
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
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
1.750% Notes due 2031	IBM 31	New York Stock Exchange
0.650% Notes due 2032	IBM 32A	New York Stock Exchange
1.200% Notes due 2040	IBM 40	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
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 April 20, 2020, regarding its financial results for the period ended March 31, 2020, including consolidated financial statements for the period ended March 31, 2020, 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 first-quarter 2020 earnings presentation on April 20, 2020, 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 April 20, 2020
99.2		Non-GAAP Financial Information
104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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


Exhibit No.		Description of Exhibit
99.3		Earnings Presentation of the Registrant, dated April 20, 2020

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.

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: April 20, 2020


	By:	/s/ Robert F. Del Bene
		Robert F. Del Bene
		Vice President and Controller

Exhibit 99.1

IBM REPORTS 2020 FIRST-QUARTER RESULTS

Continued Cloud Revenue Growth; Gross Margin Expansion; Strong Balance Sheet and Liquidity Position

ARMONK, N.Y., April 20, 2020 . . . IBM (NYSE: IBM) today announced first-quarter 2020 earnings results.

“IBM remains focused on helping our clients adapt to the immediate challenges of the COVID-19 pandemic, while we continue to enable them to shift their mission-critical workloads to hybrid cloud and expand their use of AI to help transform their operations,” said Arvind Krishna, IBM chief executive officer. “Our first-quarter performance in cloud is a reflection of the trust clients place in IBM's technology and expertise today, and positions us to continue building an enduring hybrid cloud platform for the future.”

Highlights for the first quarter include:

●	GAAP EPS from continuing operations of $1.31

●	Operating (non-GAAP) EPS of $1.84

●	Revenue of $17.6 billion, down 3.4 percent (up 0.1 percent adjusting for divested businesses and currency)

-- Cloud & Cognitive Software up 5 percent (up 7 percent adjusting for currency)

-- Systems up 3 percent (up 4 percent adjusting for currency)

-- Global Business Services flat (up 1 percent adjusting for currency)

●	Total cloud revenue of $5.4 billion, up 19 percent (up 23 percent adjusting for divested businesses and currency)

-- Cloud revenue of $22 billion over last 12 months, up 13 percent (up 16 percent adjusting for divested businesses and currency)

●	Red Hat revenue, up 18 percent (up 20 percent adjusting for currency), normalized for historical comparability

●	GAAP gross profit margin up 90 basis points; Operating (non-GAAP) gross profit margin up 150 basis points

●	Net cash from operating activities of $14.5 billion and free cash flow of $11.6 billion, over the last 12 months

●	IBM is withdrawing its full-year 2020 guidance in light of the current COVID-19 crisis. The company will reassess this position based on the clarity of the macroeconomic recovery at the end of the second quarter.


	FIRST QUARTER 2020
	Results Reflect the Impact of Items Related to
	the Red Hat Acquisition Closed in July 2019
										Pre-tax		Gross
	Diluted			Net			Pre-tax			Income/(Loss)		Profit
	EPS			Income			Income/(Loss)			Margin		Margin
GAAP from Continuing Operations	$	1.31		$	1.2B		$	0.0B		(0.3)	%	45.1	%
Year/Year		(26)	%		(26)	%		(103)	%	(10.6)	Pts	0.9	Pts

Operating (Non-GAAP)	$	1.84		$	1.6B		$	0.7B		3.9	%	46.2	%
Year/Year		(18)	%		(18)	%		(69)	%	(8.4)	Pts	1.5	Pts

“Our recurring revenue stream, continued gross profit margin expansion and strong balance sheet and liquidity position remain stabilizing elements in an unprecedented business climate,” said James Kavanaugh, IBM senior vice president and chief financial officer. “We’ve taken actions within our business to provide the necessary flexibility and operating efficiency for the current environment.”

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.5 billion, or $2.1 billion excluding Global Financing receivables. IBM’s free cash flow was $1.4 billion. The company returned $1.4 billion to shareholders in dividends.

IBM ended the first quarter with $12.0 billion of cash on hand which includes marketable securities. Debt, including Global Financing debt of $22.3 billion, totaled $64.3 billion – down $8.7 billion since the end of the second-quarter 2019.

Segment Results for First Quarter

●

Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat; Cognitive Applications; and Transaction Processing Platforms) — revenues of $5.2 billion, up 5 percent (up 7 percent adjusting for currency), with growth in Cloud & Data Platforms, up 32 percent (up 34 percent adjusting for currency) led by Red Hat.

●

Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.1 billion, flat year-to-year (up 1 percent adjusting for currency), with growth in Consulting, up 4 percent (up 5 percent adjusting for currency); gross profit margin up 100 basis points.

●	Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.5 billion, down 6 percent (down 4 percent adjusting for currency); gross profit margin up 30 basis points.

●

Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.4 billion, up 3 percent (up 4 percent adjusting for currency), led by IBM Z, up 59 percent (up 61 percent adjusting for currency) and Storage Systems revenue up 18 percent (up 19 percent adjusting for currency); gross profit margin up 410 basis points.

●	Global Financing (includes financing and used equipment sales) — revenues of $299 million, down 26 percent (down 25 percent adjusting for currency); revenue reflects the wind-down of OEM commercial financing; gross profit margin up 580 basis points.

Pre-Tax Income and Tax Rate

Pre-tax income was impacted by charges of approximately $0.9 billion, predominantly related to structural actions to improve competitiveness in Global Technology Services. IBM’s reported GAAP and operating (non-GAAP) tax rates for the first quarter include the effect of a non-cash discrete tax benefit, associated with the intercompany transfer of intellectual property, which more than offsets the charges for those structural actions.

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; 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; 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; 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, including integration challenges, failure to achieve objectives, the assumption of liabilities, and higher debt levels; legal proceedings and investigatory risks; 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. 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

IBM results —

●	adjusting for currency (i.e., at constant currency);

●	total revenue and cloud revenue adjusting for divested businesses and currency;

●	revenue for Red Hat normalized for historical comparability;

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

●	adjusting for free cash flow;

●	net cash from operating activities, excluding Global 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. EDT, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/1q20.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
	Edward Barbini, 914-499-6565
	barbini@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
	March 31,
	2020			2019
REVENUE
Cloud & Cognitive Software	$	5,238		$	4,967		*
Global Business Services		4,136			4,155		*
Global Technology Services		6,467			6,875
Systems		1,368			1,328
Global Financing		299			406
Other		62			451		*
TOTAL REVENUE		17,571			18,182

GROSS PROFIT		7,922			8,043

GROSS PROFIT MARGIN
Cloud & Cognitive Software		75.4	%		75.6	%	*
Global Business Services		27.2	%		26.2	%	*
Global Technology Services		34.0	%		33.7	%
Systems		50.2	%		46.2	%
Global Financing		40.7	%		34.9	%

TOTAL GROSS PROFIT MARGIN		45.1	%		44.2	%

EXPENSE AND OTHER INCOME
S,G&A		5,955			4,691
R,D&E		1,625			1,433
Intellectual property and custom development income		(116)			(101)
Other (income) and expense		182			(73)
Interest expense		326			210
TOTAL EXPENSE AND OTHER INCOME		7,972			6,160

INCOME/(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		(49)			1,883
Pre-tax margin		(0.3)	%		10.4	%
Provision for / (Benefit from) income taxes		(1,226)			289
Effective tax rate		NM	%		15.4	%

INCOME FROM CONTINUING OPERATIONS	$	1,176		$	1,593
DISCONTINUED OPERATIONS
Income / (Loss) from discontinued operations, net of taxes		(1)			(2)

NET INCOME	$	1,175		$	1,591

EARNINGS / (LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$	1.31		$	1.78
Discontinued Operations	$	0.00		$	0.00
TOTAL	$	1.31		$	1.78

Basic
Continuing Operations	$	1.32		$	1.79
Discontinued Operations	$	0.00		$	0.00
TOTAL	$	1.32		$	1.79

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s)
Assuming Dilution		895.0			893.9
Basic		888.0			889.6

*Recast to conform with 2020 presentation.

NM = Not Meaningful

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


	At		At
	March 31,		December 31,
(Dollars in Millions)	2020		2019
ASSETS:

Current Assets:
Cash and cash equivalents	$	11,218	$	8,172
Restricted cash		152		141
Marketable securities		647		696
Notes and accounts receivable - trade, net		6,927		7,870
Short-term financing receivables, net		12,126		14,192
Other accounts receivable, net		1,616		1,733
Inventories		1,786		1,619
Deferred costs		1,948		1,896
Prepaid expenses and other current assets		2,509		2,101
Total Current Assets		38,931		38,420

Property, plant and equipment, net		9,626		10,010
Operating right-of-use assets, net		4,871		4,996
Long-term financing receivables, net		7,708		8,712
Prepaid pension assets		6,933		6,865
Deferred costs		2,459		2,472
Deferred taxes		8,782		5,182
Goodwill		57,517		58,222
Intangibles, net		14,666		15,235
Investments and sundry assets		1,911		2,074
Total Assets	$	153,403	$	152,186

LIABILITIES:

Current Liabilities:
Taxes	$	2,348	$	2,839
Short-term debt		11,642		8,797
Accounts payable		4,172		4,896
Deferred income		13,377		12,026
Operating lease liabilities		1,327		1,380
Other liabilities		7,806		7,763
Total Current Liabilities		40,673		37,701

Long-term debt		52,685		54,102
Retirement related obligations		16,474		17,142
Deferred income		3,769		3,851
Operating lease liabilities		3,799		3,879
Other liabilities		15,874		14,526
Total Liabilities		133,275		131,202

EQUITY:

IBM Stockholders’ Equity:
Common stock		56,092		55,895
Retained earnings		162,626		162,954
Treasury stock — at cost		(169,437)		(169,413)
Accumulated other comprehensive income/(loss)		(29,283)		(28,597)
Total IBM Stockholders’ Equity		19,999		20,841

Noncontrolling interests		129		144
Total Equity		20,128		20,985

Total Liabilities and Equity	$	153,403	$	152,186

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)


	Three Months Ended				Trailing Twelve Months
	March 31,				Ended March 31,
(Dollars in Millions)	2020		2019		2020
Net Cash Provided by Operating Activities per GAAP:	$	4,476	$	4,759	$	14,487

Less: change in Global Financing (GF) Receivables		2,381		2,458		415
Capital Expenditures, Net		(737)		(614)		(2,493)

Free Cash Flow		1,358		1,688		11,579

Acquisitions		(13)		(1)		(32,642)
Divestitures		26		33		1,069
Dividends		(1,440)		(1,397)		(5,749)
Share Repurchase		—		(920)		(441)
Non-GF Debt		3,503		5,890		20,405
Other (includes GF Net Receivables and GF Debt)		(426)		629		(346)

Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities	$	3,008	$	5,922	$	(6,127)

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)


	Three Months Ended
	March 31,
(Dollars in Millions)	2020		2019
Net Income from Operations	$	1,175	$	1,591
Depreciation/Amortization of Intangibles		1,635		1,446
Stock-based Compensation		189		113
Working Capital / Other		(905)		(848)
Global Financing A/R		2,381		2,458
Net Cash Provided by Operating Activities	$	4,476	$	4,759
Capital Expenditures, net of payments & proceeds		(737)		(614)
Divestitures, net of cash transferred		26		33
Acquisitions, net of cash acquired		(13)		(1)
Marketable Securities / Other Investments, net		(178)		(271)
Net Cash Provided by / (Used in) Investing Activities	$	(902)	$	(853)
Debt, net of payments & proceeds		1,356		4,232
Dividends		(1,440)		(1,397)
Common Stock Repurchases		—		(920)
Common Stock Transactions - Other		(31)		(51)
Net Cash Provided by / (Used in) Financing Activities	$	(115)	$	1,863
Effect of Exchange Rate changes on Cash		(403)		(102)
Net Change in Cash, Cash Equivalents and Restricted Cash	$	3,057	$	5,668

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)


	Three Months Ended March 31, 2020
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software			Services			Services			Systems			Financing
Revenue
External	$	5,238		$	4,136		$	6,467		$	1,368		$	299
Internal		813			46			294			148			212
Total Segment Revenue	$	6,052		$	4,183		$	6,761		$	1,516		$	511

Pre-tax Income / (Loss) from Continuing Operations		933			271			(178)			(217)			194

Pre-tax margin		15.4	%		6.5	%		(2.6)	%		(14.3)	%		37.9	%

Change YTY Revenue - External		5.5	%		(0.5)	%		(5.9)	%		3.0	%		(26.2)	%
Change YTY Revenue - External @constant currency		6.8	%		0.9	%		(4.0)	%		4.1	%		(24.9)	%


	Three Months Ended March 31, 2019
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software*			Services*			Services			Systems			Financing
Revenue
External	$	4,967		$	4,155		$	6,875		$	1,328		$	406
Internal		841			74			290			163			300
Total Segment Revenue	$	5,808		$	4,229		$	7,164		$	1,491		$	706

Pre-tax Income / (Loss) from Continuing Operations		1,785			298			275			(202)			288

Pre-tax margin		30.7	%		7.0	%		3.8	%		(13.5)	%		40.8	%

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


	Three Months Ended March 31, 2020
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform			Operating
	GAAP			Adjustments*			Adjustments**			Impacts			(Non-GAAP)
Gross Profit	$	7,922		$	188			—			—		$	8,110

Gross Profit Margin		45.1	%		1.1	Pts		—			—			46.2	%

S,G&A		5,955			(285)			—			—			5,670

R,D&E		1,625			—			—			—			1,625

Other (Income) & Expense		182			(1)			(264)			—			(83)

Interest Expense		326			—			—			—			326

Total Expense & Other (Income)		7,972			(285)			(264)			—			7,422

Pre-tax Income/(Loss) from Continuing Operations		(49)			473			264			—			688

Pre-tax Income/(Loss) Margin from Continuing Operations		(0.3)	%		2.7	Pts		1.5	Pts		—			3.9	%

Provision for / (Benefit from) Income Taxes***		(1,226)			102			14			149			(961)

Income from Continuing Operations		1,176			371			250			(149)			1,649

Income Margin from Continuing Operations		6.7	%		2.1	Pts		1.4	Pts		(0.8)	Pts		9.4	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	1.31		$	0.42		$	0.28		$	(0.17)		$	1.84


	Three Months Ended March 31, 2019
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform			Operating
	GAAP			Adjustments*			Adjustments**			Impacts			(Non-GAAP)
Gross Profit	$	8,043		$	76			—			—		$	8,119

Gross Profit Margin		44.2	%		0.4	Pts		—			—			44.7	%

S,G&A		4,691			(124)			—			—			4,566

R,D&E		1,433			—			—			—			1,433

Other (Income) & Expense		(73)			23			(138)			—			(187)

Interest Expense		210			(36)			—			—			174

Total Expense & Other (Income)		6,160			(137)			(138)			—			5,886

Pre-tax Income/(Loss) from Continuing Operations		1,883			212			138			—			2,233

Pre-tax Income/(Loss) Margin from Continuing Operations		10.4	%		1.2	Pts		0.8	Pts		—			12.3	%

Provision for / (Benefit from) Income Taxes***		289			49			26			(141)			224

Effective Tax Rate		15.4	%		0.7	Pts		0.2	Pts		(6.3)	Pts		10.0	%

Income from Continuing Operations		1,593			164			111			141			2,009

Income Margin from Continuing Operations		8.8	%		0.9	Pts		0.6	Pts		0.8	Pts		11.0	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	1.78		$	0.18		$	0.13		$	0.16		$	2.25

* 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.

** 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.

*** 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. The effective tax rate is not displayed as the calculated rate for the three months ended March 31, 2020 is not meaningful.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


	Three Months Ended						Trailing Twelve Months Ended
	March 31, 2020						March 31, 2020
	Change YTY						Change YTY
Revenue Adjusting for Divested Businesses and Currency	Cloud			Total IBM			Cloud

Revenue as reported		18.8	%		(3.4)	%		13.2	%
Impact from divested businesses		2.4	Pts		1.9	Pts		1.5	Pts
Currency impact		1.8	Pts		1.5	Pts		1.6	Pts
Revenue adjusting for divested businesses and currency (non-GAAP)		23.0	%		0.1	%		16.4	%


	Three Months Ended				Change
Red Hat Revenue, Normalized for Historical Comparability	March 31, 2020		March 31, 2019		YTY		YTY @constant currency

Red Hat revenue as reported in IBM consolidated results⁽¹⁾	$	719	$	—
Add: Red Hat revenue prior to acquisition⁽²⁾		—		900
Add: Purchase accounting deferred revenue and intercompany adjustments⁽³⁾		347		—
Red Hat revenue, normalized for historical comparability (non-GAAP)	$	1,066	$	900	18	%	20	%

(1) Represents GAAP revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment.

(2) Revenue for the three months ended March 31, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes.

(3) Represents the first-quarter 2020 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments.

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 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 of 2017 and 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 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 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. The company’s reportable segment financial results reflect pre-tax operating earnings from continuing operations, consistent with the company’s management and measurement system. In addition, these non-GAAP measures provide a perspective consistent with areas of interest the company routinely receives from investors and analysts.

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 flows. 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.

Revenue adjusted for divested businesses and constant currency

To provide better transparency on the recurring performance of the ongoing business, the company provides total revenue, cloud and geographic revenue growth rates excluding divested businesses and at constant currency. These divested businesses are included in the company’s Other segment.

Revenue for Red Hat, normalized for historical comparability

On July 9, 2019, the company completed the acquisition of Red Hat, Inc. (Red Hat) and began including Red Hat’s financial results in the company’s consolidated results. As part of the accounting for this acquisition, the company recorded certain adjustments, including a purchase accounting deferred revenue fair value adjustment and intercompany eliminations, each of which impact IBM’s post-acquisition revenue. To help investors better understand the underlying performance of Red Hat, management presents a non-GAAP growth rate of Red Hat’s revenue performance year to year, normalized for historical comparability. The normalized (non-GAAP) Red Hat revenue for the three months ended March 31, 2020 includes adjustments to reverse the purchase accounting deferred revenue fair value adjustment and adjustments to add back revenue which was eliminated for post-acquisition sales between Red Hat and IBM. The deferred revenue adjustment represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting. The sales between Red Hat and IBM, which were eliminated post-acquisition, are added back in this presentation to provide a comparative view of Red Hat on a pre-acquisition basis. This information is included to provide additional transparency and for comparative purposes only.

Exhibit 99.3

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IBM 1Q 2020 Earnings April 20, 2020 ibm.com/investor

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Forward Looking Statements and Non-GAAP Information 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 website, 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 except as required by law; 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 revenue for Red Hat normalized for historical comparability, revenue adjusting for divested businesses and currency, operating earnings, other “operating” financial measures, including free cash flow, net cash from operating activities excluding Global Financing receivables, and adjustments for currency. The rationale for management’s use of this non-GAAP information is included as Exhibit 99.2 to the company’s Form 8-K filed with the SEC on April 20, 2020. The reconciliation of non-GAAP information to GAAP is included on the slides entitled “Non-GAAP Supplemental Materials” in this presentation, as well as in Exhibit 99.1 to the company’s Form 8-K filed with the SEC on April 20, 2020. For other related information please visit the Company’s investor relations web site at: http://www.ibm.com/investor/events/earnings/1q20.html 2

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Arvind Krishna Chief Executive Officer James Kavanaugh SVP, Finance & Operations, Chief Financial Officer 3

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CEO Perspective “IBM remains focused on helping our clients adapt to the immediate challenges of the COVID-19 pandemic, while we continue to enable them to shift their mission-critical workloads to hybrid cloud and expand their use of AI to help transform their operations. Leading in the Current Environment Areas of Future Focus Our first-quarter performance in cloud is a reflection of the trust clients place in IBM's technology and expertise today, and positions us to continue building an enduring hybrid cloud platform for the future.” First Quarter 2020 - Arvind Krishna, IBM CEO 4

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Positioned for the Current Environment and Beyond Large enterprise incumbency Aligning investments to near-term opportunities High-value business model Majority of revenue from financial Strong balance sheet services, public sector & telecom Structural actions for long-term competitiveness Ample liquidity & access to capital Client buying behavior shifting Secure dividend Accelerating digital transformation ~60% revenue in recurring businesses; mission-critical Leverage flexible supply chain 5 Recent Actions Client Base & Portfolio Financial Profile

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1Q20 Highlights $17.6B Revenue $1.84 Operating (non-GAAP) EPS $11.6B Free Cash Flow LTM Revenue & Gross Margin Solid Cash Generation Modest Revenue Growth $12B Cash Balance 128% FCF Realization (LTM) 150 bps Gross Margin Expansion Revenue/cloud growth @cc and excludes impact of divested businesses; Red Hat normalized for historical comparability Gross margin-operating, cash includes marketable securities, FCF excludes financing receivables 6 Strong Cloud Performance +23% @CC Revenue Growth $22B LTM Revenue Red Hat M mentum +20% @CC Revenue Growth >2,200 Clients using RHT & IBM container platform

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Cloud & Cognitive Software Revenue Growth Revenue $5.2B 7% Cloud & Data Platform growth led by Red Hat and Data & AI Cognitive Applications and Transaction Processing Platforms impacted by client buying behavior in March Segment Elements Cognitive Applications (3%) yr/yr Portfolio aligned to longer-term hybrid cloud & AI opportunity Cloud & Data Platforms +34% yr/yr includes Red Hat Transaction Processing Platforms (15%) yr/yr 1Q20 Results; Revenue growth rates @CC 7

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Global Business Services Consulting driven by cloud modernization and intelligent workflows Revenue $4.1B +1% yr/yr Gross Margin Expansion 100 bps Continued scaling of Red Hat engagements Segment Elements Consulting +5% yr/yr Clients are deprioritizing projects with longer-term paybacks Application Management (2%) yr/yr Aligning our resources to focus on near-term opportunities Global Process Services (7%) yr/yr 1Q20 Results; Revenue growth rates @CC 8

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Global Technology Services Actions to accelerate the shift to higher value segments and improve cost competitiveness Revenue Gross Margin Expansion $6.5B (4%) yr/yr 30 bps Tighter integration across GTS & GBS to address cloud opportunity Segment Elements Strong signings growth led by cloud Infrastructure & Cloud Services (4%) yr/yr Near-term impact from lower client business volumes Technology Support Services (5%) yr/yr 1Q20 Results; Revenue growth rates @CC 9

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Systems Revenue $1.4B Revenue Growth 4% IBM Z and Storage growth driven by product cycle and mission-critical workloads Power decline reflects cycle dynamics and exposure to smaller enterprises Segment Elements Gross Margin expansion reflects mix benefit from new innovations in IBM Z and Storage Systems Hardware +10% yr/yr Operating Systems Software (9%) yr/yr 1Q20 Results; Revenue growth rates @CC 10

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Summary • Aligning resources and investments to near-term opportunities • Strategy and portfolio aligned to hybrid cloud and AI Managing cost & expense Multiple scenarios; prepared for wide-range of outcomes Solid free cash flow & ample liquidity Structural actions for long-term competitiveness Higher value model differentiates IBM • • • • • 11 Positioned to Emerge Stronger Managing in the Current Environment

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ibm.com/investor

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Supplemental Materials Currency – Impact on Revenue Growth Revenue and P&L Highlights Services Segment Details Software & Systems Segment Details Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Offering Realignment between Segments Historical Segment Recast to reflect Offering Realignment Non-GAAP Supplemental Materials ● ● ● ● ● ● ● ● ● ● ● Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding Supplemental Materials 13

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Currency – Impact on Revenue Growth US$B Yr/Yr Revenue As Reported Currency Impact Revenue @ CC $17.6 (3.4%) (1.5 pts) (1.9%) Supplemental Materials 14 Quarterly Averages per US $ 1Q20 Yr/Yr 4/17/2020 Spot 2Q20 3Q20 4Q20 FY20 Euro 0.91 (3%) Pound 0.78 (2%) Yen 109 1% Revenue Impact, Future @ 4/17/20 Spot (1.5 pts) 0.92 0.80 108 (3%) (2%) (2%) (3%) (3%) 1% (3%) (2%) 2% (0%) 0% 1% (2-3 pts) (2-2.5 pts) (2-2.5 pts) (2-2.5 pts)

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Revenue and P&L Highlights Financial results reflect impact of transaction-related adjustments associated with the Red Hat acquisition B/(W) Yr/Yr* B/(W) Yr/Yr Revenue Highlights 1Q20 Operating P&L Highlights $ 1Q20 Revenue Cloud $17.6 $5.4 Flat 23% Gross Profit Expense Pre-Tax Income** Net Income Earnings Per Share $8.1 $7.4 $0.7 $1.6 $1.84 Flat (26%) (69%) (18%) (18%) B/(W) Yr/Yr B/(W) Yr/Yr* Geography Revenue 1Q20 Americas Europe/ME/Africa Asia Pacific $8.2 $5.5 $3.9 Flat 1% Flat Operating P&L Highlights % 1Q20 Gross Profit Margin Expense E/R Pre-Tax Margin** Net Income Tax Rate 46.2% 42.2% 3.9% 9.4% NM 1.5 pts (9.9 pts) (8.4 pts) (1.7 pts) NM Revenue growth rates @CC, $ in billions *Yr/Yr excludes impact of divested businesses **Pre-Tax Income includes impact of structural actions/charges – ($0.9B), (39 pts) yr/yr, Pre-Tax Margin impact – (5 pts) Supplemental Materials 15

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Services Segments Details B/(W) GBS Segment 1Q20 Yr/Yr B/(W) GTS Segment 1Q20 Yr/Yr Revenue (External) Consulting Global Process Services Application Management Gross Profit Margin (External) Pre-Tax Income impact of structural actions/charges Pre-Tax Income Margin impact of structural actions/charges Cloud Revenue (External) $4.1 $2.1 $0.2 $1.8 27.2% $0.3 ($0.1) 6.5% (3 pts) $1.3 1% 5% (7%) (2%) 1.0 pts (9%) (38 pts) (0.6 pts) (3 pts) 8% Revenue (External) Infrastructure & Cloud Services Technology Support Services Gross Profit Margin (External) Pre-Tax Income impact of structural actions/charges Pre-Tax Income Margin impact of structural actions/charges Cloud Revenue (External) $6.5 $4.9 $1.6 34.0% ($0.2) ($0.4) (2.6%) (6 pts) $2.3 (4%) (4%) (5%) 0.3 pts (165%) (149 pts) (6.5 pts) (6 pts) 12% B/(W) Services Signings & Backlog 1Q20 Yr/Yr Signings Backlog Backlog Yr/Yr @Actual 19% Flat (3%) $8.9 $107.8 Revenue & Signings growth rates @CC, $ in billions, Services Backlog calculated using March 31 currency spot rates, Signings & Backlog includes Security Services Supplemental Materials 16

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Software and Systems Segment Details B/(W) Yr/Yr B/(W) Yr/Yr Cloud & Cognitive Software Segment 1Q20 Systems Segment 1Q20 Revenue (External) Cognitive Applications Cloud & Data Platforms Transaction Processing Platforms Pre-Tax Income impact of structural actions/charges Pre-Tax Income Margin impact of structural actions/charges Cloud Revenue (External) $5.2 $1.2 $2.5 $1.5 $0.9 ($0.2) 15.4% (4 pts) $1.3 7% (3%) 34% (15%) (48%) (12 pts) (15.3 pts) (4 pts) 86% Revenue (External) Systems Hardware IBM Z Power Storage Operating Systems Software Gross Profit Margin (External) Systems Hardware Operating Systems Software Pre-Tax Income impact of structural actions/charges Pre-Tax Income Margin impact of structural actions/charges $1.4 $1.0 4% 10% 61% (32%) 19% (9%) 4.1 pts 9.2 pts (1.3 pts) (8%) (30 pts) (0.8 pts) (4 pts) $0.4 50.2% 38.1% 82.9% ($0.2) ($0.1) (14.3%) (4 pts) Segment results reflect impact of transaction-related adjustments associated with the Red Hat acquisition Cloud Revenue (External) $0.4 10% Revenue growth rates @CC, $ in billions Supplemental Materials 17

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Expense Summary $ in billions *includes acquisitions in the last twelve months net of non-operating acquisition-related charges and includes impact of divested businesses **represents the percentage change after excluding the impact of currency, acquisitions and divestitures Supplemental Materials 18 B/(W) Expense1Q20 Yr/Yr Acq/ CurrencyDivest*Base** SG&A – Operating $5.7 (24%) RD&E – Operating $1.6 (13%) IP and Custom Development Income ($0.1) 15% Other (Income)/Expense - Operating ($0.1) (56%) Interest Expense $0.3 (87%) Operating Expense & Other Income $7.4 (26%) impact of structural actions/charges$0.9 (15 pts) 1 pts (8 pts) (17 pts) 0 pts (12 pts) (2 pts) 0 pts(12 pts)(14 pts) (15 pts)

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Balance Sheet Summary Mar 19** Mar 20 Dec 19 Cash & Marketable Securities Core (non-GF) Assets* Global Financing Assets Total Assets $12.0 $116.4 $24.9 $153.4 $9.0 $115.3 $27.9 $152.2 $18.1 $77.6 $35.2 $130.9 Other Liabilities Core (non-GF) Debt* Global Financing Debt Total Debt Total Liabilities Equity $68.9 $42.1 $22.3 $64.3 $133.3 $20.1 $68.3 $38.2 $24.7 $62.9 $131.2 $21.0 $64.3 $20.5 $29.5 $50.0 $114.3 $16.6 $ in billions *includes eliminations of inter-company activity **pre-Red Hat acquisition close Supplemental Materials 19

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Cash Flow Summary $ in billions Supplemental Materials 20 B/(W) 1Q20Yr/Yr FY19 Net Cash from Operations $4.5 ($0.3) Less: Global Financing Receivables$2.4 ($0.1) Net Cash from Operations (excluding GF Receivables)$2.1 ($0.2) Net Capital Expenditures ($0.7) ($0.1) Free Cash Flow (excluding GF Receivables) $1.4 ($0.3) Acquisitions ($0.0) ($0.0) Divestitures $0.0 ($0.0) Dividends ($1.4) ($0.0) Share Repurchases (Gross) - $0.9 Non-GF Debt $3.5 ($2.4) Other (includes GF Net A/R & GF Debt) ($0.4) ($1.1) Change in Cash & Marketable Securities $3.0 ($2.9) $14.8 $0.5 $14.3 ($2.4) $11.9 ($32.6) $1.1 ($5.7) ($1.4) $22.8 $0.7 ($3.2)

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Cash Flow (ASC 230) 1Q20 1Q19 Net Income from Operations Depreciation / Amortization of Intangibles Stock-based Compensation Working Capital / Other Global Financing A/R Net Cash provided by Operating Activities Capital Expenditures, net of payments & proceeds Divestitures, net of cash transferred Acquisitions, net of cash acquired Marketable Securities / Other Investments, net Net Cash provided by/(used in) Investing Activities Debt, net of payments & proceeds Dividends Common Stock Repurchases Common Stock Transactions - Other Net Cash provided by/(used in) Financing Activities Effect of Exchange Rate changes on Cash Net Change in Cash, Cash Equivalents & Restricted Cash $ in billions Supplemental Materials $1.2 $1.6 $0.2 ($0.9) $2.4 $4.5 ($0.7) $0.0 ($0.0) ($0.2) ($0.9) $1.4 ($1.4) - ($0.0) ($0.1) ($0.4) $3.1 $1.6 $1.4 $0.1 ($0.8) $2.5 $4.8 ($0.6) $0.0 ($0.0) ($0.3) ($0.9) $4.2 ($1.4) ($0.9) ($0.1) $1.9 ($0.1) $5.7 21

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Offering Realignment between Segments In 2019, IBM updated its reportable segments and in 2020, this segment structure remains consistent. During the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. Accordingly, IBM is updating its Cloud & Cognitive Software segment, Global Business Services segment and the Other – divested businesses category in the first quarter of 2020 and recasting historical information in these areas for consistency with the go-forward performance. To provide some context of the magnitude of these changes, total recast revenue in 2019 is approximately $0.3 billion of IBM’s total $77 billion. There is no change to the Global Technology Services, Systems, or Global Financing segments, and there is no impact to IBM’s consolidated results. Management System Change Resulting Segment Implications - Cloud & Cognitive Software (Cognitive Applications) Divestitures of IBM's risk analytics and regulatory offerings and sales performance management offerings + Other - divested businesses - Cloud & Cognitive Software (Cognitive Applications) Realignment of certain industry-related consulting offerings to the Global Business Services segment + Global Business Services (Consulting) These changes are effective in the first quarter of 2020. Subsequent to the first quarter, on April 6, 2020, Arvind Krishna became Chief Executive Officer of IBM and announced a number of management changes, which did not impact the company’s reportable segments. Supplemental Materials 22

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Historical Segment Recast to reflect Offering Realignment Cloud & Cognitive Software 1Q19 Global Business Services 1Q19 Total Revenue External Revenue Cognitive Applications Cloud & Data Platforms Transaction Processing Platforms Internal Revenue Gross Profit $ (External) Gross Margin % (External) Segment Pre-Tax Income Pre-Tax Income Margin Total Revenue Yr/Yr Change Pre-Tax Income Yr/Yr Change $5,808 $4,967 $1,238 $1,917 $1,812 $841 $3,753 75.6% $1,785 30.7% (2.5%) 5.6% Total Revenue External Revenue Consulting Application Management Global Process Services Internal Revenue Gross Profit $ (External) Gross Margin % (External) Segment Pre-Tax Income Pre-Tax Income Margin Total Revenue Yr/Yr Change Pre-Tax Income Yr/Yr Change $4,229 $4,155 $2,001 $1,908 $247 $74 $1,087 26.2% 298 7.0% (0.8%) 145.7% Note: Additional historical recast segment information will be available on the IBM Investor Relations website and in IBM’s SEC filings $ in millions, items in bold reflect changes from previously reported results Supplemental Materials 23

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Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2020 1Q20 Yr/Yr 1Q20 Yr/Yr GAAP @CC GAAP @CC Global Technology Services Infrastructure & Cloud Services Technology Support Services Cloud Systems Systems Hardware IBM Z Power Storage Operating Systems Software Cloud (6%) (6%) (7%) 10% 3% 9% 59% (33%) 18% (11%) 9% (4%) (4%) (5%) 12% 4% 10% 61% (32%) 19% (9%) 10% Cloud & Cognitive Software Cognitive Applications Cloud & Data Platforms Transaction Processing Platforms Cloud Global Business Services Consulting Global Process Services Application Management Cloud 5% (4%) 32% (16%) 84% Flat 4% (9%) (4%) 6% 7% (3%) 34% (15%) 86% 1% 5% (7%) (2%) 8% The above reconciles the Non-GAAP financial information contained in the “Cloud & Cognitive Software”, “Global Business Services”, “Global Technology Services”, “Systems”, “Services Segment Details”, “Software & Systems Segment Details”, and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated April 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 24

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Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 1Q 2020 1Q20 Yr/Yr Divest impact Currency impact Adjusted GAAP Total Revenue (3.4%) 2 pts 2 pts 0.1% Americas Europe/ME/Africa Asia Pacific (4%) (4%) (2%) 2 pts 2 pts 1 pts 1 pts 3 pts 1 pts Flat 1% Flat Total Cloud 19% 2 pts 2 pts 23% The above reconciles the Non-GAAP financial information contained in the “1Q20 Highlights”, “Revenue and P&L Highlights”, and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated April 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 25

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Non-GAAP Supplemental Materials Reconciliation of Revenue for Red Hat, Normalized - 1Q 2020 Three Months Ended Red Hat Revenue, Normalized for Historical Comparability Mar 31 2020 Mar 31 2019 Yr/Yr Yr/Yr@CC Red Hat revenue as reported in IBM consolidated results (1) $719 $ - Add: Red Hat revenue prior to acquisition (2) Add: Purchase accounting deferred revenue and intercompany adjustments (3) Red Hat revenue normalized for historical comparability (non-GAAP) - 347 900 - $1,066 $900 18% 20% (1) (2) Represents GAAP Revenue as reported by IBM, which is included in the Cloud & Cognitive Software segment. Red Hat revenue for the three months ended March 31, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes. Represents the first-quarter 2020 impact of the deferred revenue purchase accounting adjustment and adjustments to add back revenue which was eliminated for sales between Red Hat and IBM. This line represents revenue that would have been recognized by Red Hat under GAAP if the acquisition had not occurred, but was not recognized by IBM due to purchase accounting and intercompany adjustments. (3) The above reconciles the Non-GAAP financial information contained in the “1Q20 Highlights” and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated April 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 26

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Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 1Q 2020 1Q20 Non-GAAP Adjustments Operating (Non-GAAP) GAAP SG&A Currency Acquisitions/Divestitures Base* RD&E Currency Acquisitions/Divestitures Base* Operating Expense & Other Income Currency Acquisitions/Divestitures Base* 1 pts (12 pts) (16 pts) 0 pts 4 pts (1 pts) 1 pts (8 pts) (17 pts) 0 pts (12 pts) (2 pts) 0 pts 0 pts 0 pts 0 pts (12 pts) (2 pts) 0 pts (14 pts) (15 pts) 0 pts 2 pts 1 pts 0 pts (12 pts) (14 pts) The above reconciles the Non-GAAP financial information contained in the “Expense Summary” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated April 20, 2020 for additional information on the use of these Non-GAAP financial measures. *Represents the percentage change after excluding the impact of currency, acquisitions and divestitures. Supplemental Materials 27

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Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow - Last 12 Months 12 Months Ended Mar 2020 Net Cash from Operating Activities per GAAP: $14.5 Less: change in Global Financing (GF) Receivables $0.4 Net Cash from Operating Activities (Excluding GF Receivables) $14.1 Capital Expenditures, Net ($2.5) Free Cash Flow (Excluding GF Receivables) $11.6 $ in billions The above reconciles the Non-GAAP financial information contained in the “1Q20 Highlights” and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated April 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 28

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