IBM beats on earnings as revenue drops for 16th straight quarter

IBM just reported its first quarter earnings and we're looking through them now.

It reported: Q1 EPS earnings $2.35 a share vs expectations of $2.09 a share.

Revenue of $18.68 billion versus expectations of $18.28 billion.

It also says it expects full-year free cash flow to be at high end of guidance range of $11 billion to $12 billion.

The stock is up a bit in after-hours trading.

Here's the relevant parts of the press release:

• Diluted EPS: Operating (non-GAAP) of $2.35; GAAP of $2.09
• Revenue from continuing operations of $18.7 billion
• Strategic imperatives revenue of $29.8 billion over the last 12 months represents 37 percent of IBM revenue
• Cloud revenue of $10.8 billion over the last 12 months
• For cloud delivered as a service, annual run rate of $5.4 billion in the quarter, up 46 percent adjusting for currency, up 42 percent as reported year to year
• Free cash flow of $14.3 billion over last 12 months
• Announced or closed 10 acquisitions during the quarter
• Returned $2.2 billion to shareholders in the form of gross share repurchases and dividends
• Maintains full-year operating (non-GAAP) EPS expectations of at least $13.50
• Improves view of full-year free cash flow

Strategic Imperatives

First-quarter revenues from the company's strategic imperatives --- cloud, analytics and engagement --- increased 14 percent year to year (up 17 percent adjusting for currency). Total cloud revenues (public, private and hybrid) for the quarter increased 34 percent (up 36 percent adjusting for currency). Cloud revenue over the trailing 12 months was $10.8 billion. The annual exit run rate for cloud delivered as a service -- a subset of the total cloud revenue -- increased to $5.4 billion from $3.8 billion in the first quarter of 2015. Revenues from analytics increased 7 percent (up 9 percent adjusting for currency). Revenues from mobile increased 88 percent (up 93 percent adjusting for currency) and from security increased 18 percent (up 20 percent adjusting for currency).

Full-Year 2016 Expectations

IBM continues to expect full-year 2016 operating (non-GAAP) diluted earnings per share of at least $13.50. The company expects GAAP diluted earnings per share of at least $12.35. The 2016 operating (non-GAAP) earnings expectation excludes $1.15 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges.

IBM had previously expected a free cash flow realization of GAAP net income which implied a full-year free cash flow range of $11 billion to $12 billion. The company now expects free cash flow to be at the high end of that range at the same base level of operating (non-GAAP) EPS.