UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report: January 21, 2021

(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
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 January 21, 2021, regarding its financial results for the periods ended December 31, 2020, including consolidated financial statements for the periods ended December 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 being furnished with the Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

Item 7.01. Regulation FD Disclosure.

The slides for IBM’s Chairman and Chief Executive Officer Arvind Krishna and Chief Financial Officer Jim Kavanaugh’s fourth-quarter and full-year 2020 earnings presentation on January 21, 2021, 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 furnished as part of this report:


Exhibit No.		Description of Exhibit
99.1		Earnings Release of the Registrant, dated January 21, 2021
99.2		Non-GAAP Financial Information
99.3		Earnings Presentation of the Registrant, dated January 21, 2021

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


Exhibit No.		Description of Exhibit
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

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: January 21, 2021


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

Exhibit 99.1

IBM REPORTS 2020 FOURTH-QUARTER AND FULL-YEAR RESULTS

Strong hybrid cloud adoption; Gross margin expansion; Solid cash generation

ARMONK, N.Y., January 21, 2021 . . . IBM (NYSE: IBM) today announced fourth-quarter and full-year 2020 earnings results.

“We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment." said Arvind Krishna, IBM chairman and chief executive officer. "The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021.”

Highlights

Fourth Quarter:

●	GAAP EPS from continuing operations of $1.41; Operating (non-GAAP) EPS of $2.07

—

EPS includes the impact of a pre-tax charge of more than $2.0 billion for structural actions in the fourth quarter

●	Revenue of $20.4 billion, down 6 percent (down 8 percent adjusting for divested businesses and currency)

●	Total cloud revenue of $7.5 billion, up 10 percent (up 8 percent adjusting for divested businesses and currency)

●	Red Hat revenue up 19 percent (up 17 percent adjusting for currency), normalized for historical comparability

●	GAAP gross profit margin of 51.7 percent, up 70 basis points; Operating (non-GAAP) gross profit margin of 52.5 percent, up 70 basis points

●	Debt reduced by $3.9 billion since end of third quarter

Full Year:

●	GAAP EPS from continuing operations of $6.13; Operating (non-GAAP) EPS of $8.67

●	Revenue of $73.6 billion, down 5 percent (down 4 percent adjusting for divested businesses and currency)

●	Total cloud revenue of $25.1 billion, up 19 percent (up 20 percent adjusting for divested businesses and currency)

●	Red Hat revenue up 18 percent, normalized for historical comparability

●	GAAP gross profit margin up 100 basis points; operating (non-GAAP) gross profit margin up 130 basis points

●	Net cash from operating activities of $18.2 billion; free cash flow of $10.8 billion

●	Cash on hand of $14.3 billion; debt reduced by more than $11 billion since closing the Red Hat acquisition


	FOURTH QUARTER 2020
	Results include the impact of $2.04 billion pre-tax charge
										Pre-tax		Gross
		Diluted			Net			Pre-tax		Income		Profit
		EPS *			Income *			Income *		Margin *		Margin
GAAP from Continuing Operations	$	1.41		$	1.3B		$	1.3B		6.3	%	51.7	%
Year/Year		(66)	%		(66)	%		(68)	%	(12.0)	Pts	0.7	Pts

Operating (Non-GAAP)	$	2.07		$	1.9B		$	2.1B		10.2	%	52.5	%
Year/Year		(56)	%		(56)	%		(56)	%	(11.4)	Pts	0.7	Pts

* Results include the impact of pre-tax charge of $2.04 billion for structural actions in the fourth quarter.

“In 2020 we increased investment in our business across R&D and CAPEX, and since October, announced the acquisition of seven companies focused on hybrid cloud and AI," said James Kavanaugh, IBM senior vice president and chief financial officer. "With solid cash generation, steadily expanding gross profit margins, disciplined financial management and ample liquidity, we are well positioned for success as the leading hybrid cloud platform company.”

Cash Flow and Balance Sheet

In the fourth quarter, the company generated net cash from operating activities of $5.9 billion, or $6.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.1 billion. The company returned $1.5 billion to shareholders in dividends.

For the full year, the company generated net cash from operating activities of $18.2 billion, or $13.8 billion excluding Global Financing receivables. Net capital expenditures of $3 billion increased $0.7 billion, primarily for cloud infrastructure. Free cash flow was $10.8 billion. IBM returned $5.8 billion to shareholders in dividends.

IBM ended the fourth quarter with $14.3 billion of cash on hand, which includes marketable securities, up $5.3 billion from year-end 2019. Debt, including Global Financing debt of $21.2 billion, totaled $61.5 billion, down $3.9 billion since the end of the third quarter, and down $11.5 billion since closing the Red Hat acquisition.

Segment Results for Fourth Quarter

Segment pre-tax results reflect the impact of the $2.04 billion pre-tax charge for structural actions in the fourth quarter.

●

Cloud & Cognitive Software (includes Cloud & Data Platforms which includes Red Hat, Cognitive Applications and Transaction Processing Platforms) — revenues of $6.8 billion, down 4.5 percent (down 6.6 percent adjusting for currency). Cloud & Data Platforms grew 9 percent (up 6 percent adjusting for currency) led by Red Hat. Cognitive Applications revenue was flat (down 2 percent adjusting for currency), with growth in Security and IoT. Transaction Processing Platforms declined 24 percent (down 26 percent adjusting for currency). Cloud revenue up 39 percent (up 36 percent adjusting for currency). Gross profit margin up 20 basis points.

●

Global Business Services (includes Consulting, Application Management and Global Process Services) — revenues of $4.2 billion, down 2.7 percent (down 5.2 percent adjusting for currency), driven by declines in Application Management and Consulting. Global Process Services revenue grew. Cloud revenue up 16 percent (up 14 percent adjusting for currency). Gross profit margin up 260 basis points.

●	Global Technology Services (includes Infrastructure & Cloud Services and Technology Support Services) — revenues of $6.6 billion, down 5.5 percent (down 7.8 percent adjusting for currency). Cloud revenue up 4 percent (up 1 percent adjusting for currency). Gross profit margin up 70 basis points.

●

Systems (includes Systems Hardware and Operating Systems Software) — revenues of $2.5 billion, down 17.8 percent (down 19.4 percent adjusting for currency), as a result of declines in all Systems Hardware platforms, reflecting the impact of product cycle dynamics. Cloud revenue down 18 percent (down 19 percent adjusting for currency). Gross profit margin up 380 basis points.

●	Global Financing (includes financing and used equipment sales) — revenues of $286 million, down 4.8 percent (down 6.0 percent adjusting for currency), reflecting the wind-down of OEM commercial financing.

Full-year 2020 Results

Full-year results reflect transaction-related impacts associated with the Red Hat acquisition, which closed in July 2019, and the impact of the $2.04 billion pre-tax charge for structural actions in the fourth quarter.

Diluted earnings per share from continuing operations was $6.13 compared to $10.57 in 2019, a decrease of 42 percent. Net income from continuing operations was $5.5 billion, down 42 percent year to year. Revenues for the full year 2020 totaled $73.6 billion, a decrease of 4.6 percent year to year (down 3.5 percent adjusting for divested businesses and currency) compared with $77.1 billion for the full year 2019.

Operating (non-GAAP) diluted earnings per share from continuing operations was $8.67 compared with $12.81 per diluted share for 2019, a decrease of 32 percent. Operating (non-GAAP) net income for the full year ended December 31, 2020 was $7.8 billion compared with $11.4 billion in the prior-year period, a decrease of 32 percent.


	FULL YEAR 2020
	Results include the impact of $2.04 billion pre-tax charge
										Pre-tax		Gross
		Diluted			Net			Pre-tax		Income		Profit
		EPS *			Income *			Income *		Margin *		Margin
GAAP from Continuing Operations	$	6.13	**	$	5.5B	**	$	4.6B		6.3	%	48.3	%
Year/Year		(42)	%		(42)	%		(54)	%	(6.9)	Pts	1.0	Pts

Operating (Non-GAAP)	$	8.67		$	7.8B		$	7.7B		10.4	%	49.3	%
Year/Year		(32)	%		(32)	%		(39)	%	(5.8)	Pts	1.3	Pts

* Results include the impact of pre-tax charge of $2.04 billion for structural actions in the fourth quarter.

** Consolidated diluted earnings per share was $6.23 compared to $10.56 in 2019, a decrease of 41 percent. Consolidated net income was $5.6 billion, down 41 percent year to year.

Full-Year 2021 Expectations

The company expects to grow revenue for the full year 2021 based on the current foreign exchange rates. The company also expects adjusted free cash flow of $11 billion to $12 billion in 2021. Adjusted free cash flow excludes approximately $3 billion of cash impacts from the company’s structural actions initiated in the fourth quarter of 2020 and the transaction costs associated with the separation of the managed infrastructure services business.

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; the possibility that the proposed separation of the managed infrastructure services unit of the company’s Global Technology Services segment will not be completed within the anticipated time period or at all, the possibility of disruption or unanticipated costs in connection with the proposed separation or the possibility that the separation will not achieve its intended benefits; 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;

●	net cash from operating activities, excluding Global Financing receivables;

●	free cash flow;

●	adjusted free cash flow (expectations).

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-4q20. 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
	[email protected]

	John Bukovinsky, 732-618-3531
	[email protected]

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Unaudited; Dollars in millions except per share amounts)


	Three Months Ended							Year Ended
	December 31,							December 31,
	2020			2019				2020			2019
REVENUE
Cloud & Cognitive Software	$	6,837		$	7,160	*		$	23,376		$	22,891	*
Global Business Services		4,170			4,285	*			16,162			16,798	*
Global Technology Services		6,568			6,949				25,812			27,361
Systems		2,501			3,042				6,978			7,604
Global Financing		286			301				1,123			1,400
Other		6			40	*			169			1,092	*
TOTAL REVENUE		20,367			21,777				73,620			77,147

GROSS PROFIT		10,523			11,100				35,575			36,488

GROSS PROFIT MARGIN
Cloud & Cognitive Software		79.8	%		79.5	%	*		77.5	%		77.1	%	*
Global Business Services		30.1	%		27.6	%	*		29.7	%		27.7	%	*
Global Technology Services		35.9	%		35.2	%			34.8	%		34.8	%
Systems		59.9	%		56.0	%			55.9	%		53.1	%
Global Financing		33.8	%		35.6	%			37.7	%		35.6	%

TOTAL GROSS PROFIT MARGIN		51.7	%		51.0	%			48.3	%		47.3	%

EXPENSE AND OTHER INCOME
S,G&A		7,232			5,433				23,082			20,604
R,D&E		1,611			1,596				6,333			5,989
Intellectual property and custom development income		(173)			(159)				(626)			(648)
Other (income) and expense		247			(117)				861			(968)
Interest expense		317			354				1,288			1,344
TOTAL EXPENSE AND OTHER INCOME		9,234			7,107				30,937			26,322

INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		1,289			3,993				4,637			10,166
Pre-tax margin		6.3	%		18.3	%			6.3	%		13.2	%
Provision for/(Benefit from) income taxes		25			324				(864)			731
Effective tax rate		1.9	%		8.1	%			(18.6)	%		7.2	%

INCOME FROM CONTINUING OPERATIONS	$	1,264		$	3,669			$	5,501		$	9,435
DISCONTINUED OPERATIONS
Income/(Loss) from discontinued operations, net of taxes		92			0				89			(4)

NET INCOME	$	1,356		$	3,670			$	5,590		$	9,431

EARNINGS/(LOSS) PER SHARE OF COMMON STOCK
Assuming Dilution
Continuing Operations	$	1.41		$	4.11			$	6.13		$	10.57
Discontinued Operations	$	0.10		$	0.00			$	0.10		$	(0.01)
TOTAL	$	1.51		$	4.11			$	6.23		$	10.56

Basic
Continuing Operations	$	1.42		$	4.14			$	6.18		$	10.63
Discontinued Operations	$	0.10		$	0.00			$	0.10		$	0.00
TOTAL	$	1.52		$	4.14			$	6.28		$	10.63

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (M’s)
Assuming Dilution		899.0			893.7				896.6			892.8
Basic		892.6			887.1				890.3			887.2

*Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


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

Current Assets:
Cash and cash equivalents	$	13,212	$	8,172
Restricted cash		463		141
Marketable securities		600		696
Notes and accounts receivable - trade, net		7,132		7,870
Short-term financing receivables, net		10,892		14,192
Other accounts receivable, net		714		1,733
Inventories		1,839		1,619
Deferred costs		2,107		1,896
Prepaid expenses and other current assets		2,206		2,101
Total Current Assets		39,165		38,420

Property, plant and equipment, net		10,040		10,010
Operating right-of-use assets, net		4,686		4,996
Long-term financing receivables, net		7,086		8,712
Prepaid pension assets		7,610		6,865
Deferred costs		2,449		2,472
Deferred taxes		9,241		5,182
Goodwill		59,617		58,222
Intangibles, net		13,796		15,235
Investments and sundry assets		2,282		2,074
Total Assets	$	155,971	$	152,186

LIABILITIES:

Current Liabilities:
Taxes	$	3,301	$	2,839
Short-term debt		7,183		8,797
Accounts payable		4,908		4,896
Deferred income		12,833		12,026
Operating lease liabilities		1,357		1,380
Other liabilities		10,287		7,763
Total Current Liabilities		39,869		37,701

Long-term debt		54,355		54,102
Retirement related obligations		18,248		17,142
Deferred income		4,301		3,851
Operating lease liabilities		3,574		3,879
Other liabilities		14,897		14,526
Total Liabilities		135,244		131,202

EQUITY:

IBM Stockholders’ Equity:
Common stock		56,556		55,895
Retained earnings		162,717		162,954
Treasury stock — at cost		(169,339)		(169,413)
Accumulated other comprehensive income/(loss)		(29,337)		(28,597)
Total IBM Stockholders’ Equity		20,597		20,841

Noncontrolling interests		129		144
Total Equity		20,727		20,985

Total Liabilities and Equity	$	155,971	$	152,186

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

(Unaudited)



	Three Months Ended				Year Ended
	December 31,				December 31,
(Dollars in Millions)	2020		2019		2020		2019
Net Cash Provided by Operating Activities per GAAP:	$	5,859	$	3,451	$	18,197	$	14,770

Less: change in Global Financing (GF) Receivables		(974)		(3,220)		4,349		491
Capital Expenditures, Net		(780)		(645)		(3,042)		(2,370)

Free Cash Flow		6,054		6,027		10,805		11,909

Acquisitions		(299)		—		(336)		(32,630)
Divestitures		(7)		149		503		1,076
Dividends		(1,455)		(1,438)		(5,797)		(5,707)
Share Repurchase		—		—		—		(1,361)
Non-GF Debt		(4,756)		(5,640)		221		22,792
Other (includes GF Net Receivables and GF Debt)		(1,016)		(1,046)		(130)		709

Change in Cash, Cash Equivalents, Restricted Cash and Short-term Marketable Securities	$	(1,478)	$	(1,948)	$	5,265	$	(3,213)

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW

(Unaudited)


	Three Months Ended				Year Ended
	December 31,				December 31,
(Dollars in Millions)	2020		2019		2020		2019
Net Income from Operations	$	1,356	$	3,670	$	5,590	$	9,431
Depreciation/Amortization of Intangibles		1,699		1,650		6,695		6,059
Stock-based Compensation		279		210		937		679
Working Capital / Other		3,499		1,142		625		(1,890)
Global Financing A/R		(974)		(3,220)		4,349		491
Net Cash Provided by Operating Activities	$	5,859	$	3,451	$	18,197	$	14,770
Capital Expenditures, net of payments & proceeds		(780)		(645)		(3,042)		(2,370)
Divestitures, net of cash transferred		(7)		149		503		1,076
Acquisitions, net of cash acquired		(299)		—		(336)		(32,630)
Marketable Securities / Other Investments, net		528		624		(153)		6,988
Net Cash Provided by/(Used in) Investing Activities	$	(558)	$	127	$	(3,028)	$	(26,936)
Debt, net of payments & proceeds		(4,781)		(4,181)		(3,714)		16,284
Dividends		(1,455)		(1,438)		(5,797)		(5,707)
Common Stock Repurchases		—		—		—		(1,361)
Common Stock Transactions - Other		(57)		(55)		(210)		(173)
Net Cash Provided by/(Used in) Financing Activities	$	(6,293)	$	(5,674)	$	(9,721)	$	9,042
Effect of Exchange Rate changes on Cash		113		185		(87)		(167)
Net Change in Cash, Cash Equivalents and Restricted Cash	$	(878)	$	(1,911)	$	5,361	$	(3,290)

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)


	Three Months Ended December 31, 2020
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software			Services			Services			Systems			Financing
Revenue
External	$	6,837		$	4,170		$	6,568		$	2,501		$	286
Internal		738			43			316			196			233
Total Segment Revenue	$	7,575		$	4,213		$	6,884		$	2,697		$	519

Pre-tax Income/(Loss) from Continuing Operations		1,887			148			(353)			455			195

Pre-tax Margin		24.9	%		3.5	%		(5.1)	%		16.9	%		37.6	%

Change YTY Revenue - External		(4.5)	%		(2.7)	%		(5.5)	%		(17.8)	%		(4.8)	%
Change YTY Revenue - External @constant currency		(6.6)	%		(5.2)	%		(7.8)	%		(19.4)	%		(6.0)	%


	Three Months Ended December 31, 2019
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software*			Services*			Services			Systems			Financing
Revenue
External	$	7,160		$	4,285		$	6,949		$	3,042		$	301
Internal		692			65			278			198			348
Total Segment Revenue	$	7,853		$	4,350		$	7,227		$	3,240		$	649

Pre-tax Income/(Loss) from Continuing Operations		2,729			469			645			802			252

Pre-tax Margin		34.8	%		10.8	%		8.9	%		24.8	%		38.9	%

* Recast to conform with 2020 presentation.

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

(Unaudited)


	Year Ended December 31, 2020
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software			Services			Services			Systems			Financing
Revenue
External	$	23,376		$	16,162		$	25,812		$	6,978		$	1,123
Internal		3,169			193			1,226			824			894
Total Segment Revenue	$	26,545		$	16,355		$	27,039		$	7,802		$	2,017

Pre-tax Income/(Loss) from Continuing Operations		6,362			1,351			117			449			761

Pre-tax Margin		24.0	%		8.3	%		0.4	%		5.8	%		37.7	%

Change YTY Revenue - External		2.1	%		(3.8)	%		(5.7)	%		(8.2)	%		(19.8)	%
Change YTY Revenue - External @constant currency		1.9	%		(4.1)	%		(5.4)	%		(8.7)	%		(19.2)	%


	Year Ended December 31, 2019
	Cloud &			Global			Global
	Cognitive			Business			Technology						Global
(Dollars in Millions)	Software*			Services*			Services			Systems			Financing
Revenue
External	$	22,891		$	16,798		$	27,361		$	7,604		$	1,400
Internal		2,827			278			1,157			726			1,232
Total Segment Revenue	$	25,718		$	17,076		$	28,518		$	8,330		$	2,632

Pre-tax Income/(Loss) from Continuing Operations		7,811			1,623			1,645			701			1,055

Pre-tax Margin		30.4	%		9.5	%		5.8	%		8.4	%		40.1	%

* 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 December 31, 2020
	Continuing Operations
				Acquisition-			Retirement-			Tax			Spin-off-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments⁽¹⁾			Adjustments⁽²⁾			Impacts			Charges⁽⁴⁾			(Non-GAAP)
Gross Profit	$	10,523		$	177		$	—		$	—		$	1		$	10,700
Gross Profit Margin		51.7	%		0.9	Pts		—	Pts		—	Pts		0.0	Pts		52.5	%
S,G&A		7,232			(287)			—			—			(28)			6,917
R,D&E		1,611			—			—			—			—			1,611
Other (Income) & Expense		247			(1)			(295)			—			—			(48)
Interest Expense		317			—			—			—			—			317
Total Expense & Other (Income)		9,234			(288)			(295)			—			(28)			8,623
Pre-tax Income from Continuing Operations		1,289			465			295			—			28			2,077
Pre-tax Income Margin from Continuing Operations		6.3	%		2.3	Pts		1.4	Pts		—	Pts		0.1	Pts		10.2	%
Provision for/(Benefit from) Income Taxes ⁽³⁾		25			105			96			(18)			7			216
Effective Tax Rate		1.9	%		4.6	Pts		4.4	Pts		(0.9)	Pts		0.3	Pts		10.4	%
Income from Continuing Operations		1,264			359			198			18			21			1,861
Income Margin from Continuing Operations		6.2	%		1.8	Pts		1.0	Pts		0.1	Pts		0.1	Pts		9.1	%
Diluted Earnings/(Loss) Per Share: Continuing Operations	$	1.41		$	0.40		$	0.22		$	0.02		$	0.02		$	2.07


	Three Months Ended December 31, 2019
	Continuing Operations
				Acquisition-			Retirement-			Tax			Spin-off-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments⁽¹⁾			Adjustments⁽²⁾			Impacts			Charges⁽⁴⁾			(Non-GAAP)
Gross Profit	$	11,100		$	189		$	—		$	—		$	—		$	11,289
Gross Profit Margin		51.0	%		0.9	Pts		—	Pts		—	Pts		—	Pts		51.8	%
S,G&A		5,433			(320)			—			—			—			5,113
R,D&E		1,596			(0)			—			—			—			1,596
Other (Income) & Expense		(117)			(1)			(196)			—			—			(314)
Interest Expense		354			—			—			—			—			354
Total Expense & Other (Income)		7,107			(320)			(196)			—			—			6,591
Pre-tax Income from Continuing Operations		3,993			509			196			—			—			4,698
Pre-tax Income Margin from Continuing Operations		18.3	%		2.3	Pts		0.9	Pts		—	Pts		—	Pts		21.6	%
Provision for/(Benefit from) Income Taxes ⁽³⁾		324			133			21			14			—			492
Effective Tax Rate		8.1	%		2.0	Pts		0.1	Pts		0.3	Pts		—	Pts		10.5	%
Income from Continuing Operations		3,669			376			175			(14)			—			4,206
Income Margin from Continuing Operations		16.8	%		1.7	Pts		0.8	Pts		(0.1)	Pts		—	Pts		19.3	%
Diluted Earnings/(Loss) Per Share: Continuing Operations	$	4.11		$	0.42		$	0.20		$	(0.02)		$	—		$	4.71

(1) 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.

(2) 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.

(3) 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.

(4) Managed infrastructure services spin-off charges primarily relate to transaction and third-party support costs, business separation and applicable employee retention fees, pension settlements and related tax charges.

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


	Year Ended December 31, 2020
	Continuing Operations
				Acquisition-			Retirement-			Tax			Spin-off-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments⁽¹⁾			Adjustments⁽²⁾			Impacts			Charges⁽⁴⁾			(Non-GAAP)
Gross Profit	$	35,575		$	732		$	—		$	—		$	1		$	36,308
Gross Profit Margin		48.3	%		1.0	Pts		—	Pts		—	Pts		0.0	Pts		49.3	%
S,G&A		23,082			(1,137)			—			—			(28)			21,917
R,D&E		6,333			—			—			—			—			6,333
Other (Income) & Expense		861			(2)			(1,123)			—			—			(265)
Interest Expense		1,288			—			—			—			—			1,288
Total Expense & Other (Income)		30,937			(1,139)			(1,123)			—			(28)			28,648
Pre-tax Income from Continuing Operations		4,637			1,871			1,123			—			28			7,660
Pre-tax Income Margin from Continuing Operations		6.3	%		2.5	Pts		1.5	Pts		—	Pts		0.0	Pts		10.4	%
Provision for/(Benefit from) Income Taxes ⁽³⁾		(864)			418			215			110			7			(114)
Effective Tax Rate		(18.6)	%		10.0	Pts		5.5	Pts		1.4	Pts		0.2	Pts		(1.5)	%
Income from Continuing Operations		5,501			1,454			908			(110)			21			7,774
Income Margin from Continuing Operations		7.5	%		2.0	Pts		1.2	Pts		(0.1)	Pts		0.0	Pts		10.6	%
Diluted Earnings/(Loss) Per Share: Continuing Operations	$	6.13		$	1.63		$	1.01		$	(0.12)		$	0.02		$	8.67


	Year Ended December 31, 2019
	Continuing Operations
				Acquisition-			Retirement-			Tax			Spin-off-
				Related			Related			Reform			Related			Operating
	GAAP			Adjustments⁽¹⁾			Adjustments⁽²⁾			Impacts			Charges⁽⁴⁾			(Non-GAAP)
Gross Profit	$	36,488		$	547		$	—		$	—		$	—		$	37,035
Gross Profit Margin		47.3	%		0.7	Pts		—	Pts		—	Pts		—	Pts		48.0	%
S,G&A		20,604			(1,044)			—			—			—			19,560
R,D&E		5,989			(53)			—			—			—			5,936
Other (Income) & Expense		(968)			152			(615)			—			—			(1,431)
Interest Expense		1,344			(228)			—			—			—			1,116
Total Expense & Other (Income)		26,322			(1,173)			(615)			—			—			24,533
Pre-tax Income from Continuing Operations		10,166			1,721			615			—			—			12,503
Pre-tax Income Margin from Continuing Operations		13.2	%		2.2	Pts		0.8	Pts		—	Pts		—	Pts		16.2	%
Provision for/(Benefit from) Income Taxes ⁽³⁾		731			378			103			(146)			—			1,067
Effective Tax Rate		7.2	%		2.0	Pts		0.5	Pts		(1.2)	Pts		—	Pts		8.5	%
Income from Continuing Operations		9,435			1,343			512			146			—			11,436
Income Margin from Continuing Operations		12.2	%		1.7	Pts		0.7	Pts		0.2	Pts		—	Pts		14.8	%
Diluted Earnings/(Loss) Per Share: Continuing Operations	$	10.57		$	1.50		$	0.58		$	0.16		$	—		$	12.81

INTERNATIONAL BUSINESS MACHINES CORPORATION

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

(Unaudited; Dollars in millions except per share amounts)


	Three Months Ended						Year Ended
	December 31, 2020						December 31, 2020
	Change YTY						Change YTY
Revenue Adjusting for Divested Businesses and Currency	Total IBM			Cloud			Total IBM			Cloud

Revenue as reported		(6.5)	%		9.8	%		(4.6)	%		18.6	%
Impact from divested businesses		0.3	Pts		0.6	Pts		1.1	Pts		1.4	Pts
Currency impact		(2.2)	Pts		(2.7)	Pts		(0.1)	Pts		(0.4)	Pts
Revenue adjusting for divested businesses and currency (non-GAAP)		(8.4)	%		7.7	%		(3.5)	%		19.6	%


	Three Months Ended			Year Ended
	December 31, 2020			December 31, 2020
Red Hat Revenue, Normalized for Historical Comparability	Change YTY			Change YTY

Red Hat Revenue GAAP growth rate⁽¹⁾		92	%		288	%
Impact from Red Hat revenue prior to acquisition⁽²⁾		—	Pts		(239)	Pts
Impact from purchase accounting deferred revenue and intercompany adjustments⁽³⁾		(73)	Pts		(31)	Pts
Red Hat revenue growth rate, normalized for historical comparability (non-GAAP)		19	%		18	%
Impact from currency		(2)	Pts		0	Pts
Red Hat revenue growth rate, normalized for historical comparability and adjusting for currency (non-GAAP)		17	%		18	%

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

(2) Red Hat revenue was included in IBM’s consolidated results beginning July 9, 2019. Revenue for January 1 – July 8, 2019 represents pre-acquisition Red Hat standalone revenue and is included for computing year over year change purposes.

(3) Represents change in the fourth-quarter and full-year 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, discontinued operations and certain managed infrastructure services spin-off charges and their related tax impacts. Management characterizes direct and incremental charges incurred to accomplish the managed infrastructure services spin-off as non-operating given their unique and non-recurring nature. These charges primarily relate to transaction and third party support costs, business separation and applicable employee retention fees, pension settlement charges and related tax charges. All other spending for continued managed infrastructure services business operations is included in both earnings from continuing operations and in operating (non-GAAP) earnings. 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 and 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 / Adjusted 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. Beginning in January 2021, the company started to provide an adjusted free cash flow measure. Adjusted free cash flow refers to the company’s free cash flow adjusted for the cash impacts of the structural actions (primarily workforce reduction) initiated in the fourth quarter of 2020 and the direct and incremental cash impacts of the spin-off of the managed infrastructure services business. Adjusted 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 adjusted 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) growth rate of Red Hat’s revenue for the three and twelve months ended December 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, and for the twelve months ended December 31, 2020 also includes adjustments to reverse the Red Hat standalone pre-acquisition revenue for January 1 – July 8, 2019. 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 4Q 2020 Earnings January 21, 2021 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 year to year change in 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, adjusted 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 submitted to the SEC on January 21, 2021. 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 submitted to the SEC on January 21, 2021. For other related information please visit the Company’s investor relations website at: https://www.ibm.com/investor/events/earnings-4q20 2

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

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CEO Perspective “We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment.” Hybrid Cloud and AI Strategy Actions to Accelerate Change “The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021.” - Arvind Krishna, IBM Chairman and CEO Driving Growth 4

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Hybrid Cloud Hybrid Cloud Value and AI Strategy IBM’s Hybrid Cloud and AI Solutions AI Differentiation SERVICES Partners SOFTWARE IBM Software Cloud Paks SaaS Partners HYBRID CLOUD PLATFORM INFRASTRUCTURE IBM Systems IBM Public Cloud Public Clouds AWS | Azure | Others Enterprise Infrastructure 5 Hybrid Cloud Platform Dev Sec Ops Software and System Integrator IBM Global Business Services Automation Language Trust 76% AI professionals cite trust as critically or very important to their business $1T Hybrid cloud market opportunity 2.5X Hybrid cloud value vs. public only

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Actions to Accelerate Change 6 Redesign go-to-market model Advance culture and growth mindset Optimize capital structure Separate Managed Infrastructure Services Expand ecosystem Increase investment

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Accelerating IBM’s Performance Hybrid Cloud and AI Strategy Actions to Accelerate Change Driving Growth 7

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4Q20 Highlights $20.4B Revenue $2.07 Operating (non-GAAP) EPS $10.8B Free Cash Flow (FY) Cloud Strength Strong Liquidity Position 20% @CC Revenue Growth (FY) $25B Revenue (FY) $14B Cash Balance 143% FCF Realization (FY) Cloud growth @CC excludes impact of divested businesses; Red Hat normalized for historical comparability Cash includes marketable securities, FCF excludes financing receivables and FCF realization normalized for 4Q20 structural actions charge 8 R d Hat M mentum 17% @CC Revenue Growth 2,800+ Hybrid Cloud Platform Clients Enabling Investments 70 bps Gross Margin Expansion $2.04B Structural Actions Charge

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Cloud & Cognitive Software Gross Margin Expansion Revenue $6.8B (7%) yr/yr +20 yr/yr bps Demand led by Red Hat, Cloud Paks and Security Performance reflects seasonally large transactional base and 4Q19 compare (+10%) Segment Elements Cognitive Applications (2%) yr/yr Clients opting for shorter duration ELAs in current environment Cloud & Data Platforms +6% yr/yr Transaction Processing Platforms (26%) yr/yr Strong renewal rates for subscription and support 9 4Q20 Results; Revenue growth rates @CC

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Global Business Services Revenue $4.2B (5%) yr/yr Gross Margin Expansion +260 yr/yr bps Strong book-to-bill contributes to backlog growth Consulting signings up 8% driven by application modernization Segment Elements Growth in Red Hat engagements Consulting (3%) yr/yr Application Management (9%) yr/yr Continuing to invest, with 5 acquisitions announced since October Global Process Services +4% yr/yr 10 4Q20 Results; Revenue and signings growth rates @CC

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Systems Revenue $2.5B (19%) yr/yr Gross Margin Expansion +380 yr/yr bps Performance reflects product cycle dynamics IBM Z revenue up for the year; expect z15 performance consistent with past cycles Segment Elements Strong gross margin performance Systems Hardware (20%) yr/yr Operating Systems Software (14%) yr/yr 11 4Q20 Results; Revenue growth rates @CC

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Global Technology Services Revenue $6.6B (8%) yr/yr Gross Margin Expansion +70 yr/yr bps Strong new client additions and renewal rates Client volumes down in current environment Segment Elements Restructuring contracts to improve financial profile Infrastructure & Cloud Services (8%) yr/yr Managed Infrastructure Services separation remains on track for end of 2021 Technology Support Services (7%) yr/yr 12 4Q20 Results; Revenue growth @CC

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As presented: IBM Strategic Update, October 8, 2020 Infrastructure Services Company NewCo: #1 Managed End-to-end Capabilities to Manage and Modernize Client-owned Infrastructures …with Unparalleled Scale and Expertise $19B revenue*, 2x size of next largest provider $60B services backlog, of which ~45% is cloud** Hosting & Network Services Services Management ~4,600 clients, including >75% of the Fortune 100 ~115 countries Infrastructure Modernization Hybrid Multi-cloud ~90,000 employees including deep technical skills Management *TTM revenue through June 30, 2020, adjusted to reflect estimated historical sales between IBM and NewCo **As of June 30, 2020 13

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Summary Focus on hybrid cloud and AI strategy • • Actions across portfolio, operating model, capital structure to accelerate change Improving financial profile - company expects: • Full year 2021 revenue growth based on current spot rates • Adjusted free cash flow* of $11-12 billion in 2021 and $12-13 billion in 2022 • *adjusted FCF excludes cash impacts from structural actions and transaction costs associated with the separation of managed infrastructure services business; company expects ~$4B over the next 18 months, with ~$3B in 2021 14 Accelerating IBM’s Performance

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Supplemental Materials Currency – Impact on Revenue Growth Revenue and P&L Highlights Services Segments Details Software and Systems Segment Details Expense Summary Balance Sheet Summary Cash Flow Summary Cash Flow (ASC 230) Revenue and P&L Highlights – FY 2020 Services Segments Details –FY 2020 Software and Systems Segment Details – FY 2020 Retirement - Related Summary Non-GAAP Supplemental Materials ● ● ● ● ● ● ● ● ● ● ● ● ● Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding Supplemental Materials 16

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Currency – Impact on Revenue Growth US$B Yr/Yr Revenue As Reported Currency Impact Revenue @CC $20.4 $0.5 (6%) 2 pts (9%) Supplemental Materials 17 Quarterly Averages per US $ 4Q20 Yr/Yr 1/20/2021 Spot 1Q21 2Q21 3Q21 4Q21 FY21 Euro 0.84 7% Pound 0.76 3% Yen 104 4% Revenue Impact, Future @ 1/20/21 Spot 2.2 pts 0.83 0.73 104 9% 9% 3% 1% 6% 6% 9% 5% 3% 6% 5% 4% 2% 1% 3% 3-4 pts ~4 pts 1-2 pts 0-1 pts ~2 pts

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Revenue and P&L Highlights Results include the impact of $2.04B pre-tax charge for structural actions B/(W) Yr/Yr* B/(W) Yr/Yr Revenue Highlights 4Q20 Operating P&L Highlights $ 4Q20 Revenue Cloud $20.4 $7.5 (8%) 8% Gross Profit Expense** Pre-Tax Income** Net Income** Earnings Per Share** $10.7 $8.6 $2.1 $1.9 $2.07 (5%) (31%) (56%) (56%) (56%) B/(W) Yr/Yr B/(W) Yr/Yr* Geography Revenue 4Q20 Americas Europe/ME/Africa Asia Pacific $9.4 $6.9 $4.1 (10%) (8%) (5%) Operating P&L Highlights % 4Q20 Gross Profit Margin Expense E/R** Pre-Tax Income Margin ** Net Income Margin ** Tax Rate 52.5% 42.3% 10.2% 9.1% 10.4% 0.7 pts (12.1 pts) (11.4 pts) (10.2 pts) 0.1 pts Revenue growth rates @CC, $ in billions *Yr/Yr excludes impact of divested businesses **includes impact of $2.04B pre-tax charge for structural actions Supplemental Materials 18

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Services Segments Details B/(W) Yr/Yr B/(W) Yr/Yr GBS Segment 4Q20 GTS Segment 4Q20 Revenue (External) Consulting Application Management Global Process Services Gross Profit Margin (External) Pre-Tax Income impact of structural actions Pre-Tax Income Margin impact of structural actions Cloud Revenue (External) $4.2 $2.1 $1.8 $0.3 30.1% $0.1 ($0.4) 3.5% (9 pts) $1.7 (5%) (3%) (9%) 4% 2.6 pts (68%) (79 pts) (7.3 pts) (9 pts) 14% Revenue (External) Infrastructure & Cloud Services Technology Support Services Gross Profit Margin (External) Pre-Tax Income impact of structural actions Pre-Tax Income Margin impact of structural actions Cloud Revenue (External) $6.6 $5.0 $1.6 35.9% ($0.4) ($0.9) (5.1%) (13 pts) $2.5 (8%) (8%) (7%) 0.7 pts (155%) (134 pts) (14.1 pts) (13 pts) 1% B/(W) Yr/Yr Services Signings & Backlog 4Q20 Signings Backlog Backlog Yr/Yr @Actual (18%) (4%) (1%) $12.1 $110.8 Revenue & Signings growth rates @CC, $ in billions, Services Backlog calculated using Dec 31 currency spot rates, Signings & Backlog includes Security Services Supplemental Materials 19

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Software and Systems Segment Details B/(W) Yr/Yr B/(W) Yr/Yr Cloud & Cognitive Software Segment 4Q20 Systems Segment 4Q20 Revenue (External) Cloud & Data Platforms Cognitive Applications Transaction Processing Platforms Pre-Tax Income impact of structural actions Pre-Tax Income Margin impact of structural actions Cloud Revenue (External) $6.8 $3.4 $1.5 $1.9 $1.9 ($0.6) 24.9% (8 pts) $2.2 (7%) 6% (2%) (26%) (31%) (23 pts) (9.8 pts) (8 pts) 36% 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 Pre-Tax Income Margin impact of structural actions $2.5 $2.1 (19%) (20%) (24%) (16%) (17%) (14%) 3.8 pts 4.3 pts (0.7 pts) (43%) (20 pts) (7.9 pts) (6 pts) $0.4 59.9% 55.1% 83.1% $0.5 ($0.2) 16.9% (6 pts) Cloud Revenue (External) $1.1 (19%) Revenue growth rates @CC, $ in billions Supplemental Materials 20

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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 21 B/(W) Expense4Q20 Yr/Yr Acq/ CurrencyDivest*Base** SG&A – Operating$6.9 (35%) impact of structural actions $2.0 40 pts RD&E$1.6 (1%) IP and Custom Development Income ($0.2) 9% Other (Income)/Expense - Operating ($0.0) NM Interest Expense $0.3 11% Operating Expense & Other Income $8.6 (31%) impact of structural actions $2.0 31 pts (4 pts) 2 pts(33 pts) 40 pts (1 pts) 1 pts(1 pts) (5 pts)(1 pts)(25 pts) 31 pts

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Balance Sheet Summary Dec 20 Dec 19 Cash & Marketable Securities Core (non-GF) Assets* Global Financing Assets Total Assets $14.3 $118.5 $23.2 $156.0 $9.0 $115.3 $27.9 $152.2 Other Liabilities Core (non-GF) Debt* Global Financing Debt Total Debt Total Liabilities Equity $73.7 $40.4 $21.2 $61.5 $135.2 $20.7 $68.3 $38.2 $24.7 $62.9 $131.2 $21.0 $ in billions *includes eliminations of inter-company activity Supplemental Materials 22

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Cash Flow Summary $ in billions Supplemental Materials 23 B/(W) 4Q20Yr/Yr B/(W) FY20 Yr/Yr Net Cash from Operations $5.9 $2.4 Less: Global Financing Receivables ($1.0) $2.2 Net Cash from Operations (excluding GF Receivables)$6.8 $0.2 Net Capital Expenditures ($0.8) ($0.1) Free Cash Flow (excluding GF Receivables)$6.1 $0.0 Acquisitions ($0.3) ($0.3) Divestitures ($0.0) ($0.2) Dividends ($1.5) ($0.0) Share Repurchases (Gross) - - Non-GF Debt ($4.8) $0.9 Other (includes GF Net A/R & GF Debt) ($1.0) $0.0 Change in Cash & Marketable Securities ($1.5) $0.5 $18.2 $3.4 $4.3 $3.9 $13.8 ($0.4) ($3.0) ($0.7) $10.8 ($1.1) ($0.3) $32.3 $0.5 ($0.6) ($5.8) ($0.1) - $1.4 $0.2 ($22.6) ($0.1) ($0.8) $5.3 $8.5

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Cash Flow (ASC 230) $ in billions Supplemental Materials 24 4Q204Q19 FY20 FY19 Net Income from Operations$1.4 $3.7 Depreciation / Amortization of Intangibles$1.7 $1.6 Stock-based Compensation$0.3 $0.2 Working Capital / Other $3.5 $1.1 Global Financing A/R($1.0) ($3.2) Net Cash provided by Operating Activities$5.9 $3.5 Capital Expenditures, net of payments & proceeds ($0.8) ($0.6) Divestitures, net of cash transferred ($0.0) $0.1 Acquisitions, net of cash acquired ($0.3) - Marketable Securities / Other Investments, net $0.5 $0.6 Net Cash provided by/(used in) Investing Activities($0.6) $0.1 Debt, net of payments & proceeds ($4.8) ($4.2) Dividends ($1.5) ($1.4) Common Stock Repurchases-- Common Stock Transactions - Other ($0.1) ($0.1) Net Cash provided by/(used in) Financing Activities($6.3) ($5.7) Effect of Exchange Rate changes on Cash$0.1 $0.2 Net Change in Cash, Cash Equivalents & Restricted Cash($0.9) ($1.9) $5.6 $9.4 $6.7 $6.1 $0.9 $0.7 $0.6 ($1.9) $4.3 $0.5 $18.2 $14.8 ($3.0) ($2.4) $0.5 $1.1 ($0.3) ($32.6) ($0.2) $7.0 ($3.0) ($26.9) ($3.7) $16.3 ($5.8) ($5.7) - ($1.4) ($0.2) ($0.2) ($9.7) $9.0 ($0.1) ($0.2) $5.4 ($3.3)

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Revenue and P&L Highlights – FY 2020 Results include the impact of $2.04B pre-tax charge for structural actions in 4Q20 B/(W) Yr/Yr* B/(W) Yr/Yr Revenue Highlights FY20 Operating P&L Highlights $ FY20 Gross Profit Expense** Pre-Tax Income** Net Income** Earnings Per Share** $36.3 $28.6 $7.7 $7.8 $8.67 (2%) (17%) (39%) (32%) (32%) B/(W) Yr/Yr Revenue Cloud $73.6 $25.1 (4%) 20% B/(W) Yr/Yr * Geography Revenue FY20 Americas Europe/ME/Africa Asia Pacific $34.1 $23.6 $15.9 (4%) (4%) (4%) Operating P&L Highlights % FY20 Gross Profit Margin Expense E/R ** Pre-Tax Income Margin ** Net Income Margin ** Tax Rate 49.3% 38.9% 10.4% 10.6% (1.5%) 1.3 pts (7.1 pts) (5.8 pts) (4.3 pts) 10.0 pts Revenue growth rates @CC, $ in billions *Yr/Yr excludes impact of divested businesses **includes impact of $2.04B pre-tax charge for structural actions in 4Q20 Supplemental Materials 25

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Services Segments Details – FY 2020 B/(W) Yr/Yr B/(W) Yr/Yr GBS Segment FY20 GTS Segment FY20 Revenue (External) Consulting Application Management Global Process Services Gross Profit Margin (External) Pre-Tax Income * Pre-Tax Income Margin* Cloud Revenue (External) $16.2 $8.1 $7.1 $0.9 29.7% $1.4 8.3% $5.8 (4%) (1%) (7%) (5%) 2.0 pts (17%) (1.2 pts) 11% Revenue (External) Infrastructure & Cloud Services Technology Support Services Gross Profit Margin (External) Pre-Tax Income* Pre-Tax Income Margin * Cloud Revenue (External) $25.8 $19.7 $6.1 34.8% $0.1 0.4% $9.4 (5%) (5%) (6%) Flat (93%) (5.3 pts) 10% Revenue & Signings growth rates @CC, $ in billions * includes impact of pre-tax charge for structural actions in 4Q20 Supplemental Materials 26

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Software and Systems Segment Details – FY 2020 B/(W) Yr/Yr B/(W) Yr/Yr Cloud & Cognitive Software Segment FY20 Systems Segment FY20 Revenue (External) Cloud & Data Platforms Cognitive Applications Transaction Processing Platforms Pre-Tax Income* Pre-Tax Income Margin * Cloud Revenue (External) $23.4 $11.5 $5.3 $6.6 $6.4 24.0% $7.0 2% 20% (3%) (17%) (19%) (6.4 pts) 67% Revenue (External) Systems Hardware IBM Z Power Storage Operating Systems Software Gross Profit Margin (External) Systems Hardware Operating Systems Software Pre-Tax Income* Pre-Tax Income Margin* Cloud Revenue (External) $7.0 $5.5 (9%) (8%) 1% (23%) (7%) (11%) 2.8 pts 4.4 pts (1.5 pts) (36%) (2.7 pts) $1.5 55.9% 48.7% 82.3% $0.4 5.8% $2.9 (3%) Revenue growth rates @CC, $ in billions * includes impact of pre-tax charge for structural actions in 4Q20 Supplemental Materials 27

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Expense Summary – FY 2020 $ in billions *includes impact of $2.04B pre-tax charge for structural actions in 4Q20 **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 28 B/(W) Expense MetricsFY20 Yr/Yr Acq/ CurrencyDivest**Base*** SG&A – Operating* $21.9 (12%) RD&E – Operating $6.3 (7%) IP and Custom Development Income ($0.6) (3%) Other (Income)/Expense - Operating ($0.3) NM Interest Expense - Operating $1.3 (15%) Operating Expense & Other Income* $28.6 (17%) 0 pts (3 pts) (9 pts) 0 pts (5 pts) (1 pts) (2 pts)(8 pts)(7 pts)

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Retirement Related Summary $ in billions *Qualified defined benefit plans **includes cash and non-cash contributions Supplemental Materials 29 Key Assumptions and Metrics2019 2020 2021 Expected Cost and Contributions2020 2021 Funded Status at Year end* US107% 108% WW102% 102% Discount Rate at Year end US3.1% 2.2% WW2.2% 1.5% Expected ROA at Prior Year end US5.3% 4.5% 3.8% WW4.9% 4.0% 3.4% Actual ROA US14.9% 12.2% WW13.6% 9.6% Operating Cost1.5 1.5 Non-operating Cost1.1 1.4 Total Cost2.6 2.9 Contributions** 2.2 2.3

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Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 4Q 2020 4Q20 Yr/Yr 4Q20 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 (5%) (5%) (6%) 4% (18%) (19%) (23%) (15%) (15%) (12%) (18%) (8%) (8%) (7%) 1% (19%) (20%) (24%) (16%) (17%) (14%) (19%) Cloud & Cognitive Software Cloud & Data Platforms Cognitive Applications Transaction Processing Platforms Cloud Global Business Services Consulting Application Management Global Process Services Cloud (5%) 9% Flat (24%) 39% (3%) Flat (6%) 6% 16% (7%) 6% (2%) (26%) 36% (5%) (3%) (9%) 4% 14% 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 and 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 January 21, 2021 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 30

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Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - FY 2020 FY20 Yr/Yr FY20 Yr/Yr GAAP @CC GAAP @CC Cloud & Cognitive Software Cloud & Data Platforms Cognitive Applications Transaction Processing Platforms Cloud Global Business Services Consulting Application Management Global Process Services Cloud 2% 21% (3%) (17%) 67% (4%) (1%) (7%) (5%) 11% 2% 20% (3%) (17%) 67% (4%) (1%) (7%) (5%) 11% Global Technology Services Infrastructure & Cloud Services Technology Support Services Cloud Systems Systems Hardware IBM Z Power Storage Operating Systems Software Cloud (6%) (5%) (7%) 10% (8%) (7%) 2% (22%) (6%) (11%) (3%) (5%) (5%) (6%) 10% (9%) (8%) 1% (23%) (7%) (11%) (3%) The above reconciles the Non-GAAP financial information contained in the “Services Segments Details – FY 2020”, “Software and Systems Segment Details – FY 2020”, and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8 -K dated January 21, 2021 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 31

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Non-GAAP Supplemental Materials Reconciliation of Revenue Performance - 4Q & FY 2020 The above reconciles the Non-GAAP financial information contained in the “4Q20 Highlights”, “Revenue and P&L Highlights”, “Revenue and P&L Highlights – FY 2020”, and “Prepared Remarks” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 21, 2021 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 32 4Q20 Yr/Yr GAAPDivest impact Currency impact Adjusted FY20 Yr/Yr GAAPDivest impact Currency impact Adjusted Total Revenue(6%) 0 pts (2 pts) (8%) (5%) 1 pts (0 pts) (4%) Americas (11%) 0 pts 1 pts (10%) Europe/ME/Africa (3%) 0 pts (6 pts) (8%) Asia Pacific (2%) 0 pts (4 pts) (5%) Total Cloud 10% 1 pts (3 pts) 8% (6%) 1 pts 1 pts (4%) (3%) 1 pts (1 pts) (4%) (3%) 1 pts (1 pts) (4%) 19% 1 pts (0 pts) 20%

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Non-GAAP Supplemental Materials Reconciliation of Continuing Operations - 4Q 2020 4Q20 Acquisition-Related Adjustments Retirement-Related Adjustments Spin-off-Related Charges Tax Reform Impacts Adjusted GAAP Gross Profit Gross Profit Margin SG&A Total Expense Pre-tax Income Pre-tax Income Margin Tax Rate Net Income Net Income Margin Earnings Per Share $10,523 51.7% 7,232 9,234 1,289 6.3% 1.9% 1,264 6.2% $1.41 $177 0.9 pts (287) (288) 465 2.3 pts 4.6 pts 359 1.8 pts $0.40 — — — (295) 295 1.4 pts 4.4 pts 198 1.0 pts $0.22 — — — — — — (0.9 pts) 18 0.1 pts $0.02 $1 0.0 pts (28) (28) 28 0.1 pts 0.3 pts 21 0.1 pts $0.02 $10,700 52.5% 6,917 8,623 2,077 10.2% 10.4% 1,861 9.1% $2.07 $ in millions (except EPS which is in whole dollars) The above reconciles the Non-GAAP financial information contained in the “4Q20 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 January 21, 2021 for additional information on the use of these Non-GAAP financial measures. Supplemental Materials 33

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Non-GAAP Supplemental Materials Reconciliation of Expense Summary - 4Q & FY 2020 The above reconciles the Non-GAAP financial information contained in the “Expense Summary” and “Expense Summary – FY 2020” discussions in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 21, 2021 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 34 4Q20 Non-GAAPOperating GAAPAdjustments(Non-GAAP) FY20 Non-GAAPOperating GAAPAdjustments(Non-GAAP) SG&A Currency (4 pts) 0 pts (4 pts) Acquisitions/Divestitures2 pts 0 pts 2 pts Base*(31 pts) (2 pts) (33 pts) RD&E Currency(1 pts) 0 pts (1 pts) Acquisitions/Divestitures1 pts 0 pts 1 pts Base*(1 pts) 0 pts (1 pts) Operating Expense & Other Income Currency(4 pts) 0 pts (5 pts) Acquisitions/Divestitures(1 pts) 0 pts (1 pts) Base*(24 pts) (1 pts) (25 pts) 0 pts 0 pts 0 pts (4 pts) 2 pts (3 pts) (7 pts) (2 pts) (9 pts) 0 pts 0 pts 0 pts (5 pts) 0 pts (5 pts) 0 pts (1 pts) (1 pts) (2 pts) 0 pts (2 pts) (9 pts) 1 pts (8 pts) (7 pts) 0 pts (7 pts)

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Non-GAAP Supplemental Materials Reconciliation of Free Cash Flow Realization - FY 2020 FY Excluding Structural Actions* FY Free Cash Flow Realization 196% 143% The above reconciles the Non-GAAP financial information contained in the “4Q20 Highlights” discussion in the company’s earnings presentation. See Exhibit 99.2 included in the company’s Form 8-K dated January 21, 2021 for additional information on the use of these Non-GAAP financial measures. * Adjusted for $2.04B charge for structural actions in 4Q20. Supplemental Materials 35

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