IBM (NYSE: IBM) reported Q2 EPS of $4.32, $0.03 better than the analyst estimate of $4.29. Revenue for the quarter came in at $24.4 billion versus the consensus estimate of $24.13 billion.

Key points:

• Services backlog of $136 billion, down 1 percent adjusting for divested customer care outsourcing business;
• Strategic growth initiatives grew double digits:
  • Cloud revenue up more than 50 percent year-to-date;
    • For cloud delivered as a service, second-quarter annual run rate up nearly 100 percent to $2.8 billion year-to-year;
  • Business analytics revenue up 7 percent year-to-date;

  • Mobile revenue up more than 100 percent year-to-date;

  • Security revenue up more than 20 percent year-to-date;
• Continue to expect full-year operating (non-GAAP) EPS of at least $18.00.

Services

Global Services segment revenues decreased 1 percent (down 1 percent, adjusting for currency) to $13.9 billion. Revenues increased 1 percent adjusting for the impact of the divested customer care outsourcing business. Global Technology Services segment revenues decreased 1 percent (down 1 percent, adjusting for currency) to $9.4 billion. Adjusting for the impact of the divested customer care outsourcing business, revenues were up 2 percent (up 2 percent adjusting for currency). Global Business Services segment revenues were down 2 percent (down 2 percent, adjusting for currency) to $4.5 billion.

Pre-tax income from Global Technology Services increased 22 percent and pre-tax margin increased to 19.2 percent, including the impact of a $0.4 billion workforce rebalancing charge in the prior year. Global Business Services pre-tax income increased 34 percent and pre-tax margin increased to 17.8 percent, including the impact of a $0.2 billion workforce rebalancing charge in the prior year.

The estimated services backlog at June 30 was $136 billion, down 1 percent adjusting for the divested customer care outsourcing business (down 3 percent adjusting for currency).

Software

Revenues from the Software segment were $6.5 billion, up 1 percent (flat adjusting for currency) compared with the second quarter of 2013. Software pre-tax income increased 10 percent and pre-tax margin increased to 36.5 percent, including the impact of a $0.2 billion workforce rebalancing charge in the prior year.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Workforce Solutions and Rational products, were $4.3 billion, up 1 percent (flat adjusting for currency) versus the second quarter of 2013. Operating systems revenues of $530 million were down 13 percent (down 13 percent, adjusting for currency) compared with the prior-year quarter.

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