INTERNATIONAL BUSINESS MACHINES CORP (Form: 8-K, Received: 07/20/2020 16:15:02)

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: July 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 July 20, 2020, regarding its financial results for the periods ended June 30, 2020, including consolidated financial statements for the periods ended June 30, 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 Executive Officer Arvind Krishna and Chief Financial Officer Jim Kavanaugh’s second-quarter 2020 earnings presentation on July 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 July 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 July 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: July 20, 2020


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

Exhibit 99.1

IBM REPORTS 2020 SECOND-QUARTER RESULTS

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

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

“Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption," said Arvind Krishna, IBM chief executive officer. "We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.”

Highlights for the second quarter include:

●	GAAP EPS from continuing operations of $1.52

●	Operating (non-GAAP) EPS of $2.18

●	Revenue of $18.1 billion, down 5.4 percent (down 1.9 percent adjusting for divested businesses and currency)

-- Cloud & Cognitive Software revenue up 3 percent (up 5 percent adjusting for currency)

-- Systems revenue up 6 percent

●	Total cloud revenue of $6.3 billion, up 30 percent (up 34 percent adjusting for divested businesses and currency)

-- Total cloud revenue of $23.5 billion over the last 12 months, up 20 percent (up 23 percent adjusting for divested businesses and currency)

●	Red Hat revenue up 17 percent (up 18 percent adjusting for currency), normalized for historical comparability

●	GAAP gross profit margin of 48 percent, up 100 basis points; Operating (non-GAAP) gross profit margin of 49 percent up 160 basis points

●	Net cash from operating activities of $15.1 billion and free cash flow of $11.5 billion, over the last 12 months


	SECOND 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		Profit
	EPS			Income			Income			Margin		Margin
GAAP from Continuing Operations	$	1.52		$	1.4B		$	1.6B		8.7	%	48.0	%
Year/Year		(46)	%		(46)	%		(43)	%	(5.8)	Pts	1.0	Pts

Operating (Non-GAAP)	$	2.18		$	1.9B		$	2.3B		12.8	%	49.0	%
Year/Year		(31)	%		(31)	%		(27)	%	(3.8)	Pts	1.6	Pts

“Our prudent financial management in these turbulent times enabled us to expand our gross profit margin, generate strong free cash flow and improve our liquidity position," said James Kavanaugh, IBM senior vice president and chief financial officer. "We have the financial flexibility to continue to invest in our business and return value to our shareholders through our dividend policy.”

Cash Flow and Balance Sheet

In the second quarter, the company generated net cash from operating activities of $3.6 billion, or $3.0 billion excluding Global Financing receivables. IBM’s free cash flow was $2.3 billion. The company returned $1.5 billion to shareholders in dividends.

IBM ended the second quarter with $14.3 billion of cash on hand which includes marketable securities, up $5.2 billion from year-end 2019. Debt, including Global Financing debt of $21.9 billion, totaled $64.7 billion.

Segment Results for Second Quarter

Segment results reflect growing adoption of IBM's hybrid cloud platform while clients continue to shift priorities to preserve cash and maintain operational stability.

●

Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat, Cognitive Applications and Transaction Processing Platforms) — revenues of $5.7 billion, up 3 percent (up 5 percent adjusting for currency), with growth in Cloud & Data Platforms, up 29 percent (up 30 percent adjusting for currency) led by Red Hat. Cognitive Applications and Transaction Processing Platforms declined. Cloud revenue more than doubled.

●

Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $3.9 billion, down 7 percent (down 6 percent adjusting for currency), driven by declines in Application Management and Consulting. Cloud revenue up 12 percent (up 13 percent adjusting for currency). Gross profit margin up 240 basis points.

●	Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.3 billion, down 8 percent (down 5 percent adjusting for currency). Cloud revenue up 18 percent (up 20 percent adjusting for currency).

●

Systems (includes Systems Hardware and Operating Systems Software) — revenues of $1.9 billion, up 6 percent, led by IBM Z, up 69 percent (up 68 percent adjusting for currency). Storage Systems revenue up 2 percent (up 3 percent adjusting for currency); Power declined. Cloud revenue up 22 percent. Gross profit margin up 430 basis points.

●	Global Financing (includes financing and used equipment sales) — revenues of $265 million, down 25 percent (down 23 percent adjusting for currency), reflecting the wind-down of OEM commercial financing. Gross profit margin up 360 basis points.

Year-To-Date 2020 Results

Consolidated diluted earnings per share was $2.83 compared to $4.58, down 38 percent year to year. Consolidated net income was $2.5 billion, down 38 percent year to year. Revenues for the six-month period ended June 30, 2020 totaled $35.7 billion, a decrease of 4 percent year to year (down 1 percent adjusting for divested businesses and currency) compared with $37.3 billion for the first six months of 2019.

Operating (non-GAAP) diluted earnings per share from continuing operations was $4.02 compared with $5.42 per diluted share for the 2019 period, a decrease of 26 percent. Operating (non-GAAP) net income for the six months ended June 30, 2020 was $3.6 billion compared with $4.8 billion in the prior-year period, a decrease of 26 percent.

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, health and other 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;

●	Red Hat revenue 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 https://www.ibm.com/investor/events/ibm-2q-2020-earnings-announcement. 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							Six Months Ended
	June 30,							June 30,
	2020			2019				2020			2019
REVENUE
Cloud & Cognitive Software	$	5,748		$	5,563	*		$	10,987		$	10,530	*
Global Business Services		3,890			4,197	*			8,027			8,353	*
Global Technology Services		6,316			6,837				12,783			13,711
Systems		1,852			1,753				3,220			3,081
Global Financing		265			351				564			757
Other		50			460	*			113			911	*
TOTAL REVENUE		18,123			19,161				35,694			37,342

GROSS PROFIT		8,700			9,010				16,622			17,053

GROSS PROFIT MARGIN
Cloud & Cognitive Software		77.1	%		77.7	%	*		76.3	%		76.7	%	*
Global Business Services		28.4	%		26.0	%	*		27.8	%		26.1	%	*
Global Technology Services		34.2	%		34.4	%			34.1	%		34.1	%
Systems		57.8	%		53.5	%			54.6	%		50.3	%
Global Financing		38.6	%		35.0	%			39.7	%		34.9	%

TOTAL GROSS PROFIT MARGIN		48.0	%		47.0	%			46.6	%		45.7	%

EXPENSE AND OTHER INCOME
S,G&A		5,248			5,456				11,203			10,147
R,D&E		1,582			1,407				3,207			2,840
Intellectual property and custom development income		(203)			(222)				(319)			(323)
Other (income) and expense		179			(747)				361			(820)
Interest expense		323			348				649			558
TOTAL EXPENSE AND OTHER INCOME		7,129			6,242				15,101			12,402

INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		1,571			2,768				1,522			4,651
Pre-tax margin		8.7	%		14.4	%			4.3	%		12.5	%
Provision for / (Benefit from) income taxes		209			269				(1,017)			558
Effective tax rate		13.3	%		9.7	%			(66.8)	%		12.0	%

INCOME FROM CONTINUING OPERATIONS	$	1,362		$	2,499			$	2,538		$	4,093
DISCONTINUED OPERATIONS
Income / (Loss) from discontinued operations, net of taxes		(1)			(1)				(2)			(4)

NET INCOME	$	1,361		$	2,498			$	2,536		$	4,089

EARNINGS / (LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$	1.52		$	2.81			$	2.83		$	4.58
Discontinued Operations	$	0.00		$	0.00			$	0.00		$	0.00
TOTAL	$	1.52		$	2.81			$	2.83		$	4.58

Basic
Continuing Operations	$	1.53		$	2.82			$	2.85		$	4.61
Discontinued Operations	$	0.00		$	0.00			$	0.00		$	0.00
TOTAL	$	1.53		$	2.82			$	2.85		$	4.61

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s)
Assuming Dilution		894.9			890.8				895.0			892.4
Basic		889.4			886.3				888.7			887.9

*Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


	At		At
	June 30,		December 31,
(Dollars in Millions)	2020		2019
ASSETS:

Current Assets:
Cash and cash equivalents	$	12,041	$	8,172
Restricted cash		147		141
Marketable securities		2,063		696
Notes and accounts receivable - trade, net		6,543		7,870
Short-term financing receivables, net		11,967		14,192
Other accounts receivable, net		937		1,733
Inventories		1,869		1,619
Deferred costs		2,127		1,896
Prepaid expenses and other current assets		2,260		2,101
Total Current Assets		39,953		38,420

Property, plant and equipment, net		9,709		10,010
Operating right-of-use assets, net		4,774		4,996
Long-term financing receivables, net		7,351		8,712
Prepaid pension assets		7,254		6,865
Deferred costs		2,445		2,472
Deferred taxes		8,689		5,182
Goodwill		57,833		58,222
Intangibles, net		14,270		15,235
Investments and sundry assets		1,921		2,074
Total Assets	$	154,200	$	152,186

LIABILITIES:

Current Liabilities:
Taxes	$	2,627	$	2,839
Short-term debt		9,289		8,797
Accounts payable		4,719		4,896
Deferred income		12,469		12,026
Operating lease liabilities		1,343		1,380
Other liabilities		7,995		7,763
Total Current Liabilities		38,442		37,701

Long-term debt		55,449		54,102
Retirement related obligations		16,483		17,142
Deferred income		3,787		3,851
Operating lease liabilities		3,684		3,879
Other liabilities		15,666		14,526
Total Liabilities		133,512		131,202

EQUITY:

IBM Stockholders’ Equity:
Common stock		56,135		55,895
Retained earnings		162,559		162,954
Treasury stock — at cost		(169,386)		(169,413)
Accumulated other comprehensive income/(loss)		(28,757)		(28,597)
Total IBM Stockholders’ Equity		20,551		20,841

Noncontrolling interests		137		144
Total Equity		20,688		20,985

Total Liabilities and Equity	$	154,200	$	152,186

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)


	Three Months Ended				Six Months Ended				Trailing Twelve Months
	June 30,				June 30,				Ended June 30,
(Dollars in Millions)	2020		2019		2020		2019		2020
Net Cash Provided by Operating Activities per GAAP:	$	3,576	$	2,941	$	8,052	$	7,700	$	15,122

Less: change in Global Financing (GF) Receivables		589		119		2,971		2,577		885
Capital Expenditures, Net		(697)		(431)		(1,434)		(1,045)		(2,759)

Free Cash Flow		2,290		2,391		3,647		4,078		11,477

Acquisitions		(6)		(42)		(19)		(43)		(32,607)
Divestitures		731		855		757		888		945
Dividends		(1,450)		(1,435)		(2,890)		(2,833)		(5,764)
Share Repurchase		—		(316)		—		(1,236)		(126)
Non-GF Debt		455		27,509		3,958		33,399		(6,649)
Other (includes GF Net Receivables and GF Debt)		213		(698)		(213)		(68)		564

Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities	$	2,233	$	28,264	$	5,241	$	34,186	$	(32,158)

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in Millions)	2020		2019		2020		2019
Net Income from Operations	$	1,361	$	2,498	$	2,536	$	4,089
Depreciation/Amortization of Intangibles		1,678		1,294		3,313		2,740
Stock-based Compensation		247		135		436		248
Working Capital / Other		(300)		(1,106)		(1,204)		(1,954)
Global Financing A/R		589		119		2,971		2,577
Net Cash Provided by Operating Activities	$	3,576	$	2,941	$	8,052	$	7,700
Capital Expenditures, net of payments & proceeds		(697)		(431)		(1,434)		(1,045)
Divestitures, net of cash transferred		731		855		757		888
Acquisitions, net of cash acquired		(6)		(42)		(19)		(43)
Marketable Securities / Other Investments, net		(1,264)		3,779		(1,442)		3,509
Net Cash Provided by / (Used in) Investing Activities	$	(1,236)	$	4,162	$	(2,138)	$	3,309
Debt, net of payments & proceeds		(38)		22,841		1,319		27,073
Dividends		(1,450)		(1,435)		(2,890)		(2,833)
Common Stock Repurchases		—		(316)		—		(1,236)
Common Stock Transactions - Other		(137)		(59)		(168)		(111)
Net Cash Provided by / (Used in) Financing Activities	$	(1,624)	$	21,031	$	(1,739)	$	22,894
Effect of Exchange Rate changes on Cash		101		129		(301)		27
Net Change in Cash, Cash Equivalents and Restricted Cash	$	817	$	28,263	$	3,874	$	33,930

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)


	Three Months Ended June 30, 2020
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software			Services			Services			Systems			Financing
Revenue
External	$	5,748		$	3,890		$	6,316		$	1,852		$	265
Internal		743			55			304			240			241
Total Segment Revenue	$	6,491		$	3,945		$	6,621		$	2,092		$	506

Pre-tax Income / (Loss) from Continuing Operations		1,708			362			250			248			176

Pre-tax Margin		26.3	%		9.2	%		3.8	%		11.8	%		34.9	%

Change YTY Revenue - External		3.3	%		(7.3)	%		(7.6)	%		5.7	%		(24.5)	%
Change YTY Revenue - External @constant currency		4.6	%		(6.0)	%		(5.4)	%		6.3	%		(22.7)	%


	Three Months Ended June 30, 2019
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software*			Services*			Services			Systems			Financing
Revenue
External	$	5,563		$	4,197		$	6,837		$	1,753		$	351
Internal		607			69			302			171			281
Total Segment Revenue	$	6,170		$	4,266		$	7,139		$	1,924		$	632

Pre-tax Income / (Loss) from Continuing Operations		2,007			290			235			61			239

Pre-tax Margin		32.5	%		6.8	%		3.3	%		3.2	%		37.8	%

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)


	Six Months Ended June 30, 2020
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software			Services			Services			Systems			Financing
Revenue
External	$	10,987		$	8,027		$	12,783		$	3,220		$	564
Internal		1,556			101			599			388			453
Total Segment Revenue	$	12,543		$	8,128		$	13,382		$	3,608		$	1,017

Pre-tax Income / (Loss) from Continuing Operations		2,641			633			72			31			370

Pre-tax Margin		21.1	%		7.8	%		0.5	%		0.9	%		36.4	%

Change YTY Revenue - External		4.3	%		(3.9)	%		(6.8)	%		4.5	%		(25.4)	%
Change YTY Revenue - External @constant currency		5.6	%		(2.6)	%		(4.7)	%		5.4	%		(23.9)	%


	Six Months Ended June 30, 2019
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software*			Services*			Services			Systems			Financing
Revenue
External	$	10,530		$	8,353		$	13,711		$	3,081		$	757
Internal		1,448			143			591			334			581
Total Segment Revenue	$	11,978		$	8,495		$	14,303		$	3,415		$	1,338

Pre-tax Income / (Loss) from Continuing Operations		3,792			587			510			(141)			527

Pre-tax Margin		31.7	%		6.9	%		3.6	%		(4.1)	%		39.4	%

* 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 June 30, 2020
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform		Operating
	GAAP			Adjustments*			Adjustments**			Impacts		(Non-GAAP)
Gross Profit	$	8,700		$	187		$	—		$	—	$	8,887

Gross Profit Margin		48.0	%		1.0	Pts		—			—		49.0	%

S,G&A		5,248			(285)			—			—		4,962

R,D&E		1,582			—			—			—		1,582

Other (Income) & Expense		179			(1)			(273)			—		(95)

Interest Expense		323			—			—			—		323

Total Expense & Other (Income)		7,129			(286)			(273)			—		6,570

Pre-tax Income from Continuing Operations		1,571			473			273			—		2,318

Pre-tax Income Margin from Continuing Operations		8.7	%		2.6	Pts		1.5	Pts		—		12.8	%

Provision for / (Benefit from) Income Taxes***		209			108			52			—		369

Effective Tax Rate		13.3	%		1.9	Pts		0.7	Pts		—		15.9	%

Income from Continuing Operations		1,362			365			222			—		1,949

Income Margin from Continuing Operations		7.5	%		2.0	Pts		1.2	Pts		—		10.8	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	1.52		$	0.41		$	0.25		$	—	$	2.18


	Three Months Ended June 30, 2019
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform			Operating
	GAAP			Adjustments*			Adjustments**			Impacts			(Non-GAAP)
Gross Profit	$	9,010		$	73		$	—		$	—		$	9,083

Gross Profit Margin		47.0	%		0.4	Pts		—			—			47.4	%

S,G&A		5,456			(149)			—			—			5,307

R,D&E		1,407			—			—			—			1,407

Other (Income) & Expense		(747)			119			(136)			—			(764)

Interest Expense		348			(168)			—			—			180

Total Expense & Other (Income)		6,242			(198)			(136)			—			5,907

Pre-tax Income from Continuing Operations		2,768			272			136			—			3,176

Pre-tax Income Margin from Continuing Operations		14.4	%		1.4	Pts		0.7	Pts		—			16.6	%

Provision for / (Benefit from) Income Taxes***		269			55			40			(14)			349

Effective Tax Rate		9.7	%		0.9	Pts		0.8	Pts		(0.4)	Pts		11.0	%

Income from Continuing Operations		2,499			217			97			14			2,827

Income Margin from Continuing Operations		13.0	%		1.1	Pts		0.5	Pts		0.1	Pts		14.8	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	2.81		$	0.24		$	0.11		$	0.01		$	3.17

* 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.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


	Six Months Ended June 30, 2020
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform			Operating
	GAAP			Adjustments*			Adjustments**			Impacts			(Non-GAAP)
Gross Profit	$	16,622		$	375		$	—		$	—		$	16,998

Gross Profit Margin		46.6	%		1.1	Pts		—			—			47.6	%

S,G&A		11,203			(570)			—			—			10,633

R,D&E		3,207			—			—			—			3,207

Other (Income) & Expense		361			(1)			(538)			—			(178)

Interest Expense		649			—			—			—			649

Total Expense & Other (Income)		15,101			(571)			(538)			—			13,992

Pre-tax Income from Continuing Operations		1,522			946			538			—			3,006

Pre-tax Income Margin from Continuing Operations		4.3	%		2.7	Pts		1.5	Pts		—			8.4	%

Provision for / (Benefit from) Income Taxes***		(1,017)			210			65			149			(592)

Effective Tax Rate		(66.8)	%		28.0	Pts		14.1	Pts		5.0	Pts		(19.7)	%

Income from Continuing Operations		2,538			736			472			(149)			3,598

Income Margin from Continuing Operations		7.1	%		2.1	Pts		1.3	Pts		(0.4)	Pts		10.1	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	2.83		$	0.83		$	0.53		$	(0.17)		$	4.02


	Six Months Ended June 30, 2019
	Continuing Operations
				Acquisition-			Retirement-			Tax
				Related			Related			Reform			Operating
	GAAP			Adjustments*			Adjustments**			Impacts			(Non-GAAP)
Gross Profit	$	17,053		$	149		$	—		$	—		$	17,202

Gross Profit Margin		45.7	%		0.4	Pts		—			—			46.1	%

S,G&A		10,147			(273)			—			—			9,873

R,D&E		2,840			—			—			—			2,840

Other (Income) & Expense		(820)			142			(274)			—			(951)

Interest Expense		558			(204)			—			—			354

Total Expense & Other (Income)		12,402			(335)			(274)			—			11,793

Pre-tax Income from Continuing Operations		4,651			484			274			—			5,409

Pre-tax Income Margin from Continuing Operations		12.5	%		1.3	Pts		0.7	Pts		—			14.5	%

Provision for / (Benefit from) Income Taxes***		558			104			66			(155)			574

Effective Tax Rate		12.0	%		0.8	Pts		0.6	Pts		(2.9)	Pts		10.6	%

Income from Continuing Operations		4,093			381			208			155			4,836

Income Margin from Continuing Operations		11.0	%		1.0	Pts		0.6	Pts		0.4	Pts		13.0	%

Diluted Earnings / (Loss) Per Share: Continuing Operations	$	4.58		$	0.44		$	0.23		$	0.17		$	5.42

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


										Trailing
	Three Months Ended						Six Months Ended			Twelve Months Ended
	June 30, 2020						June 30, 2020			June 30, 2020
	Change YTY						Change YTY			Change YTY
Revenue Adjusting for Divested Businesses and Currency	Cloud			Total IBM			Total IBM			Cloud

Revenue as reported		30.1	%		(5.4)	%		(4.4)	%		20.2	%
Impact from divested businesses		2.4	Pts		2.0	Pts		2.0	Pts		1.8	Pts
Currency impact		1.8	Pts		1.6	Pts		1.6	Pts		1.3	Pts
Revenue adjusting for divested businesses and currency (non-GAAP)		34.3	%		(1.9)	%		(0.9)	%		23.4	%


	Three Months Ended				Change
Red Hat Revenue, Normalized for Historical Comparability	June 30, 2020		June 30, 2019		YTY		YTY @constant currency

Red Hat revenue as reported in IBM consolidated results⁽¹⁾	$	867	$	—
Add: Red Hat revenue prior to acquisition⁽²⁾		—		936
Add: Purchase accounting deferred revenue and intercompany adjustments⁽³⁾		227		—
Red Hat revenue, normalized for historical comparability (non-GAAP)	$	1,094	$	936	17	%	18	%

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

(2) Revenue for the three months ended June 30, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes.

(3) Represents the second-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 June 30, 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

IBM 2Q 2020 Earnings July 20, 2020 ibm.com/investor

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 July 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 July 20, 2020. For other related information please visit the Company’s investor relations website at: https://www.ibm.com/investor/events/ibm-2q-2020-earnings-announcement 2

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

CEO Perspective “Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption.” Current Environment Hybrid Cloud Platform “We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.” Progress on Strategic Priorities - Arvind Krishna, IBM CEO 4

Positioned for the Current Environment and Beyond Large enterprise incumbency Simplifying go-to-market High-value business model Favorable industry concentration Enabling virtual selling Strong balance sheet Broad geographic footprint Creating dynamic delivery model Ample liquidity & access to capital Recurring revenue base Expanding ecosystem Increased dividend 5 Operating Model Client Base & Portfolio Financial Profile

2Q20 Highlights $18.1B Revenue $2.18 Operating (non-GAAP) EPS $11.5B Free Cash Flow LTM Cloud Strength Solid Cash Generation +34% @CC Revenue Growth $23B LTM Revenue $14B Cash Balance 146% FCF Realization (LTM) Cloud growth @CC excludes impact of divested businesses; Red Hat normalized for historical comparability Gross margin expansion-operating, cash includes marketable securities, FCF excludes financing receivables 6 R d Hat M mentum +18% @CC Revenue Growth >2,400 Container platform clients High Value Model 60% Recurring Revenue 1.6 pts Gross Margin Expansion

Cloud & Cognitive Software Revenue Growth Revenue $5.7B 5% Growth in Cloud & Data Platform led by Red Hat and Cloud Paks Cognitive Applications and Transaction Processing Platforms impacted by economic environment Segment Elements Cognitive Applications (8%) yr/yr Profit reflects Red Hat purchase accounting and other transaction-related adjustments Cloud & Data Platforms +30% yr/yr includes Red Hat Transaction Processing Platforms (14%) yr/yr 7 2Q20 Results; Revenue growth rates @CC

Global Business Services Digital transformation drives acceleration in cloud Revenue $3.9B (6%) yr/yr Gross Margin 28.4% +2.4 pts yr/yr Continued scaling of Red Hat engagements Segment Elements Clients deprioritizing discretionary spending and projects with longer-term paybacks Consulting (3%) yr/yr Application Management (8%) yr/yr Strong gross margin expansion Global Process Services (12%) yr/yr 8 2Q20 Results; Revenue growth rates @CC

Global Technology Services Revenue impacted by lower volumes in challenged industries Revenue $6.3B (5%) yr/yr Gross Margin 34.2% (0.3) pts yr/yr Digital transformation drives cloud revenue growth Segment Elements Continued signings momentum with 2Q signings and 1H signings growth Infrastructure & Cloud Services (5%) yr/yr Technology Support Services (6%) yr/yr 9 2Q20 Results; Revenue and signings growth @CC

Systems Revenue $1.9B Revenue Growth 6% IBM Z and Storage growth reflects client demand for resiliency and offering innovation Power performance driven by product cycle dynamics Segment Elements Gross margin expansion benefits from IBM Z and Storage product cycle Systems Hardware +13% yr/yr Operating Systems Software (13%) yr/yr 10 2Q20 Results; Revenue growth rates @CC

Summary Current environment provides near-term challenges and longer-term opportunities • • Compelling offerings aligned to hybrid cloud and AI Strong second half pipeline; results will be influenced by rate and pace of economic recovery Solid financial profile and ample liquidity • • 11 Positioned to Emerge Stronger

ibm.com/investor

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

Currency – Impact on Revenue Growth US$B Yr/Yr Revenue As Reported Currency Impact Revenue @ CC 18.1 (0.3) (5.4%) (1.5 pts) (3.9%) Supplemental Materials 14 Quarterly Averages per US $ 1Q20 Yr/Yr2Q20 Yr/Yr 7/17/2020 Spot 3Q20 4Q20 FY20 Euro 0.91 (3%) 0.91 (2%) Pound 0.78 (2%) 0.81 (4%) Yen 109 1% 108 2% Revenue Impact, Future @ 7/17/20 Spot (1.5 pts) 0.88 0.80 107 3% 3% 0% 2% (3%) (2%) 0% 1% 1% (0-1 pts) (0-1 pts) (1-1.5 pts)

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 2Q20 Operating P&L Highlights $ 2Q20 Revenue Cloud $18.1 $6.3 (1.9%) 34% Gross Profit Expense Pre-Tax Income Net Income Earnings Per Share $8.9 $6.6 $2.3 $1.9 $2.18 (2%) (11%) (27%) (31%) (31%) B/(W) Yr/Yr B/(W) Yr/Yr* Geography Revenue 2Q20 Americas Europe/ME/Africa Asia Pacific $8.5 $5.7 $4.0 Flat (3%) (4%) Operating P&L Highlights % 2Q20 Gross Profit Margin Expense E/R Pre-Tax Margin Net Income Tax Rate 49.0% 36.3% 12.8% 10.8% 15.9% 1.6 pts (5.4 pts) (3.8 pts) (4.0 pts) (4.9 pts) Revenue growth rates @CC, $ in billions *Yr/Yr excludes impact of divested businesses Supplemental Materials 15

Services Segments Details B/(W) Yr/Yr B/(W) Yr/Yr GBS Segment 2Q20 GTS Segment 2Q20 Revenue (External) Consulting Global Process Services Application Management Gross Profit Margin (External) Pre-Tax Income impact of workforce rebalancing Pre-Tax Income Margin impact of workforce rebalancing Cloud Revenue (External) $3.9 $1.9 $0.2 $1.7 28.4% $0.4 (6%) (3%) (12%) (8%) 2.4 pts 25% 18 pts 2.4 pts 1 pts 13% Revenue (External) Infrastructure & Cloud Services Technology Support Services Gross Profit Margin (External) Pre-Tax Income impact of workforce rebalancing Pre-Tax Income Margin impact of workforce rebalancing Cloud Revenue (External) $6.3 $4.8 $1.5 34.2% $0.2 ($0.1) 3.8% (1 pts) $2.4 (5%) (5%) (6%) (0.3 pts) 6% 33 pts 0.5 pts 2 pts 20% 9.2% (1 pts) $1.4 B/(W) Yr/Yr Services Signings & Backlog 2Q20 Signings Backlog Backlog Yr/Yr @Actual (14%) (1%) (4%) $8.2 $107.1 Revenue & Signings growth rates @CC, $ in billions, Services Backlog calculated using June 30 currency spot rates, Signings & Backlog includes Security Services Supplemental Materials 16

Software and Systems Segment Details B/(W) Yr/Yr B/(W) Yr/Yr Cloud & Cognitive Software Segment 2Q20 Systems Segment 2Q20 Revenue (External) Cognitive Applications Cloud & Data Platforms Transaction Processing Platforms Pre-Tax Income impact of workforce rebalancing Pre-Tax Income Margin impact of workforce rebalancing Cloud Revenue (External) $5.7 $1.2 $2.8 $1.7 $1.7 5% (8%) 30% (14%) (15%) 4 pts (6.2 pts) 2 pts 116% 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 workforce rebalancing Pre-Tax Income Margin impact of workforce rebalancing $1.9 $1.5 6% 13% 68% (28%) 3% (13%) 4.3 pts 8.3 pts (2.3 pts) 305% 123 pts 8.7 pts 1 pts $0.4 57.8% 51.9% 82.0% $0.2 26.3% $1.6 Segment results reflect impact of transaction-related adjustments associated with the Red Hat acquisition 11.8% Cloud Revenue (External) $0.8 22% Revenue growth rates @CC, $ in billions Supplemental Materials 17

Expense Summary $ in billions *2Q20 SG&A includes ~$140M workforce rebalancing; 2Q19 SG&A includes $495M workforce rebalancing and ~$85M other charges offset by ~$580M divestiture gains in Other (Income)/Expense **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) Expense2Q20 Yr/Yr Acq/ CurrencyDivest**Base*** SG&A – Operating$5.0* 6%* RD&E$1.6 (12%) IP and Custom Development Income ($0.2) (9%) Other (Income)/Expense - Operating($0.1) (88%)* Interest Expense – Operating $0.3 (80%) Operating Expense & Other Income$6.6 (11%) 1 pts (7 pts) 12 pts 1 pts (13 pts) 0 pts 0 pts(22 pts)11 pts

Balance Sheet Summary Jun 19** Jun 20 Dec 19 Cash & Marketable Securities Core (non-GF) Assets* Global Financing Assets Total Assets $14.3 $115.2 $24.7 $154.2 $9.0 $115.3 $27.9 $152.2 $46.4 $79.0 $29.3 $154.7 Other Liabilities Core (non-GF) Debt* Global Financing Debt Total Debt Total Liabilities Equity $68.8 $42.8 $21.9 $64.7 $133.5 $20.7 $68.3 $38.2 $24.7 $62.9 $131.2 $21.0 $63.8 $48.1 $25.0 $73.0 $136.9 $17.8 $ in billions *includes eliminations of inter-company activity **pre-Red Hat acquisition close Supplemental Materials 19

Cash Flow Summary $ in billions Supplemental Materials 20 QTDB/(W) 2Q20Yr/Yr YTDB/(W) 2Q20 Yr/Yr Net Cash from Operations $3.6 $0.6 Less: Global Financing Receivables $0.6 $0.5 Net Cash from Operations (excluding GF Receivables)$3.0 $0.2 Net Capital Expenditures ($0.7) ($0.3) Free Cash Flow (excluding GF Receivables) $2.3 ($0.1) Acquisitions ($0.0) $0.0 Divestitures $0.7 ($0.1) Dividends ($1.5) ($0.0) Share Repurchases (Gross) - $0.3 Non-GF Debt $0.5 ($27.1) Other (includes GF Net A/R & GF Debt) $0.2 $0.9 Change in Cash & Marketable Securities $2.2 ($26.0) $8.1 $0.4 $3.0 $0.4 $5.1 ($0.0) ($1.4) ($0.4) $3.6 ($0.4) ($0.0) $0.0 $0.8 ($0.1) ($2.9) ($0.1) - $1.2 $4.0 ($29.4) ($0.2) ($0.1) $5.2 ($28.9)

Cash Flow (ASC 230) $ in billions Supplemental Materials 21 QTDQTD 2Q202Q19 YTDYTD 2Q20 2Q19 Net Income from Operations$1.4 $2.5 Depreciation / Amortization of Intangibles $1.7 $1.3 Stock-based Compensation $0.2 $0.1 Working Capital / Other ($0.3) ($1.1) Global Financing A/R $0.6 $0.1 Net Cash provided by Operating Activities$3.6 $2.9 Capital Expenditures, net of payments & proceeds ($0.7) ($0.4) Divestitures, net of cash transferred $0.7 $0.9 Acquisitions, net of cash acquired ($0.0) ($0.0) Marketable Securities / Other Investments, net ($1.3) $3.8 Net Cash provided by/(used in) Investing Activities($1.2) $4.2 Debt, net of payments & proceeds ($0.0) $22.8 Dividends ($1.5) ($1.4) Common Stock Repurchases - ($0.3) Common Stock Transactions - Other ($0.1) ($0.1) Net Cash provided by/(used in) Financing Activities($1.6) $21.0 Effect of Exchange Rate changes on Cash $0.1 $0.1 Net Change in Cash, Cash Equivalents & Restricted Cash$0.8 $28.3 $2.5 $4.1 $3.3 $2.7 $0.4 $0.2 ($1.2) ($2.0) $3.0 $2.6 $8.1 $7.7 ($1.4) ($1.0) $0.8 $0.9 ($0.0) ($0.0) ($1.4) $3.5 ($2.1) $3.3 $1.3 $27.1 ($2.9) ($2.8) - ($1.2) ($0.2) ($0.1) ($1.7) $22.9 ($0.3) $0.0 $3.9 $33.9

Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 2Q 2020 2Q20 Yr/Yr 2Q20 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 (8%) (7%) (10%) 18% 6% 12% 69% (29%) 2% (14%) 22% (5%) (5%) (6%) 20% 6% 13% 68% (28%) 3% (13%) 22% Cloud & Cognitive Software Cognitive Applications Cloud & Data Platforms Transaction Processing Platforms Cloud Global Business Services Consulting Global Process Services Application Management Cloud 3% (9%) 29% (16%) 114% (7%) (4%) (14%) (10%) 12% 5% (8%) 30% (14%) 116% (6%) (3%) (12%) (8%) 13% The above reconciles the Non-GAAP financial information contained in the “Cloud & Cognitive Software”, “Global Business Services”, “Global Technology Services”, “Systems”, “Services Segments 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 July 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 22

Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 2Q 2020 2Q20 Yr/Yr Divest impact Currency impact Adjusted GAAP Total Revenue (5.4%) 2 pts 2 pts (1.9%) Americas Europe/ME/Africa Asia Pacific (4%) (7%) (5%) 2 pts 2 pts 1 pts 2 pts 2 pts 1 pts Flat (3%) (4%) Total Cloud 30% 2 pts 2 pts 34% The above reconciles the Non-GAAP financial information contained in the “2Q20 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 July 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 23

Non-GAAP Supplemental Materials Reconciliation of Revenue for Red Hat, Normalized - 2Q 2020 Three Months Ended Red Hat Revenue, Normalized for Historical Comparability Jun 30 2020 Jun 30 2019 Yr/Yr Yr/Yr@CC Red Hat revenue as reported in IBM consolidated results (1) $867 $ - 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) - 227 936 - $1,094 $936 17% 18% (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 June 30, 2019 represents pre-acquisition Red Hat standalone revenue and is included for comparative purposes. Represents the second-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 “2Q20 Highlights” and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 24

Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 2Q 2020 2Q20 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 (11 pts) 13 pts 0 pts 4 pts (1 pts) 1 pts (7 pts) 12 pts 1 pts (12 pts) (1 pts) 0 pts (1 pts) 1 pts 1 pts (13 pts) 0 pts 0 pts (25 pts) 10 pts 0 pts 2 pts 1 pts 0 pts (22 pts) 11 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 July 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 25

Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow - Last 12 Months 12 Months Ended Jun 2020 Net Cash from Operating Activities per GAAP: $15.1 Less: change in Global Financing (GF) Receivables $0.9 Net Cash from Operating Activities (Excluding GF Receivables) $14.2 Capital Expenditures, Net ($2.8) Free Cash Flow (Excluding GF Receivables) $11.5 $ in billions The above reconciles the Non-GAAP financial information contained in the “2Q20 Highlights” and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated July 20, 2020 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 26

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