IBM Common Stock (NYSE:IBM) stock rose 2.75% (As on July 20, 11:3:33 AM UTC-4, Source: Google Finance) after the company reported second-quarter earnings that topped analysts’ estimates as the company expanded its gross margin. Revenue missed consensus estimates. IBM’s largest division, its software segment, reported $6.6 billion in sales, which was up over 7% from a year ago. Software includes products such as its Red Hat Enterprise Linux operating system and security software. The part of that division that grew the fastest was data and artificial intelligence products, which were up 10% from a year earlier. In May, IBM billed WatsonX as a development studio for companies to “train, tune and deploy” machine-learning models, 15 months after the company sold its Watson Health unit.

Further, IBM’s consulting segment grew over 4% on an annual basis to $5 billion in sales. The company’s infrastructure division, which includes its mainframe sales, declined 14.6% to $3.6 billion in revenue. The drop was driven by lower revenue from its Z Systems servers, which were down 30%. The Operating (Non-GAAP) margin for the quarter is 55.9 percent, up 140 basis points. Year to date net cash from operating activities of $6.4 billion, up $1.8 billion and free cash flow was of $3.4 billion, up $0.1 billion. The company returned $1.5 billion to shareholders in dividends in the second quarter. IBM ended the second quarter with $16.3 billion of cash and marketable securities, up $7.5 billion from year-end 2022. Debt, including IBM Financing debt of $10.6 billion, totaled $57.5 billion, up $6.5 billion since the end of 2022.

IBM in the second quarter of FY 23 has reported the adjusted earnings per share of $2.18, beating the analysts’ estimates for the adjusted earnings per share of $2.01, according to Refinitiv. The company had reported the adjusted revenue of $15.48 billion in the second quarter of FY 23, missing the analysts’ estimates for revenue of $15.58 billion. This is driven by a decline in sales of its mainframe computers as businesses cut tech spending. Net income for the quarter rose 13% to $1.6 billion from $1.4 billion, a year earlier. IBM’s adjusted gross margin of 55.9% was higher than the StreetAccount estimate of 54.7%. Revenue was virtually flat from a year earlier.

IBM reiterated that it expects between 3% and 5% revenue growth through the end of the year in constant currency. The company forecasts about $10.5 billion in free cash flow in 2023.