International Business Machines Corp. (NYSE:IBM)

Capitalized software

The capitalized software asset shows a consistent downward trend over the five-year period, decreasing from 1777 million USD in 2020 to 1282 million USD in 2024. This decline suggests reduced capitalization of software development costs or increased amortization impacting the net book value.

Client relationships

Client relationships have exhibited overall growth, moving from 8838 million USD in 2020 to 9704 million USD in 2024, with a slight dip in 2022 before recovering in subsequent years. This trend indicates strengthening or acquisition of valuable customer contracts or relationships.

Completed technology

Completed technology shows some volatility, declining from 5957 million USD in 2020 to 5220 million USD in 2022, then increasing steadily to 6297 million USD by 2024. The recovery and growth suggest investment or acquisition efforts in technological assets during the later years.

Patents/trademarks

Patents and trademarks decreased gradually from 2246 million USD in 2020 to 1826 million USD in 2024, with a notable drop between 2022 and 2023. This decline could reflect amortization or disposal of intellectual property assets.

Other intangible assets

The "Other" intangible assets category shows relative volatility with low values around 56 million USD in 2020, dipping to 19 million USD in 2022, and subsequently rising sharply to 138 million USD in 2024. This may indicate occasional recognition or reclassification of minor intangible assets.

Intangible assets, gross carrying amount

The gross carrying amount of intangible assets fluctuated slightly, initially increasing modestly from 18874 million USD in 2020 to 19031 million USD in 2021, then decreasing to 17588 million USD in 2022 before rising again to reach 19247 million USD in 2024. The pattern suggests asset additions and disposals impacting the gross carrying value.

Accumulated amortization

Accumulated amortization steadily increased in absolute terms, from -5078 million USD in 2020 to -8587 million USD in 2024, indicating consistent amortization expense charged against intangible assets each year, leading to a reduction in their net carrying amount.

Intangible assets, net carrying amount

The net carrying amount of intangible assets declined from 13796 million USD in 2020 to 10660 million USD in 2024, reflecting the impact of both amortization and changes in gross carrying amount. The downward trend suggests that amortization and possibly disposals have outweighed additions.

Goodwill

Goodwill decreased from 59617 million USD in 2020 to 55643 million USD in 2021, followed by a modest recovery to 60706 million USD in 2024. The initial decline may indicate impairment or divestitures, while the subsequent increase suggests acquisitions or revaluations adding goodwill.

Intangible assets including goodwill

Total intangible assets including goodwill trended downward from 73413 million USD in 2020 to 68154 million USD in 2021 and 67133 million USD in 2022. It then recovered to 71366 million USD by 2024, reflecting dynamics in goodwill and intangible assets net values. This pattern implies a period of reduced intangible asset value followed by renewed investment or acquisitions boosting the total.

Total Assets

Reported total assets show a declining trend from 155,971 million US dollars in 2020 to 127,243 million in 2022, followed by a partial recovery to 137,175 million in 2024. This indicates some asset reduction in the initial years, with stabilization and moderate growth in the latter years.

Adjusted total assets, which likely exclude goodwill and other intangible assets, exhibit a consistent downward trajectory from 96,354 million in 2020 to 71,294 million in 2022, then a slight increase to 76,469 million by 2024. This pattern confirms the reduction of core tangible assets over time, with minor recovery toward the end of the period.

Stockholders’ Equity

Reported total IBM stockholders’ equity decreases from 20,597 million in 2020 to 18,901 million in 2021, then rises steadily to reach 27,307 million in 2024. This reflects an initial drop followed by a consistent improvement in shareholders' equity, potentially driven by retained earnings or capital injections.

Adjusted total IBM stockholders’ equity is negative throughout the period, beginning at -39,020 million in 2020 and somewhat improving to -33,399 million in 2024. The persistent negative values suggest the presence of substantial deductions or reclassifications such as goodwill impairments or intangible asset adjustments that significantly reduce adjusted equity figures.

Summary and Insights

The divergence between reported and adjusted figures indicates significant goodwill or intangible asset components affecting the balance sheet. While reported total assets and equity show moderate stabilization or growth in recent years, the adjusted metrics reveal a contrasting picture of contraction and negative equity, highlighting potential risks related to asset quality or valuation.

The steady improvement in reported equity from 2021 onward suggests enhanced financial strength or profitability, whereas the adjusted negative equity implies ongoing challenges in asset valuation that might affect stakeholders' perception of the firm's net worth.

Total Asset Turnover

The reported total asset turnover ratio exhibits slight fluctuations over the five-year period. It begins at 0.47 in 2020, declines to 0.43 in 2021, then increases to 0.48 in 2022, followed by a minor decrease to 0.46 in both 2023 and 2024. Conversely, the adjusted total asset turnover, which excludes goodwill effects, shows higher levels throughout. It starts at 0.76 in 2020, slightly decreases to 0.75 in 2021, rises to 0.85 in 2022, and then declines modestly to 0.82 for 2023 and 2024. The adjusted figures suggest a consistently more efficient use of assets than the reported figures indicate.

Financial Leverage

The reported financial leverage ratio demonstrates a downward trend during the timeframe. It decreases steadily from 7.57 in 2020 to 5.02 in 2024, indicating a reduction in the degree of debt financing. Data for adjusted financial leverage is not available, which limits insight into the influence of intangible assets on leverage.

Return on Equity (ROE)

The reported ROE shows considerable variability across the years. It increases from 27.14% in 2020 to a peak of 30.38% in 2021, then sharply falls to 7.47% in 2022. Thereafter, it rebounds to 33.29% in 2023 before decreasing again to 22.06% in 2024. This volatility may reflect fluctuations in profitability, financial structure, and possibly extraordinary items. Adjusted ROE data is not provided, precluding a deeper assessment excluding goodwill.

Return on Assets (ROA)

Reported ROA follows a pattern of initial increase, sharp decline, then recovery. It rises from 3.58% in 2020 to 4.35% in 2021, dips significantly to 1.29% in 2022, then recovers to 5.55% and 4.39% in 2023 and 2024 respectively. Adjusted ROA, which adjusts for goodwill, is consistently higher than the reported ROA, starting at 5.8% in 2020 and rising to a peak of 9.99% in 2023 before settling slightly lower at 7.88% in 2024. The higher adjusted ROA figures suggest that intangible assets, such as goodwill, affect the reported asset base, and removing them presents a more favorable profitability picture relative to tangible assets employed.

Total Assets

The reported total assets demonstrate a decreasing trend from 155,971 million US dollars at the end of 2020 to 127,243 million in 2022, followed by a slight recovery reaching 137,175 million by the end of 2024. In contrast, the adjusted total assets, which likely exclude goodwill, show a consistent decline from 96,354 million in 2020 to 71,294 million in 2022, then gradually increase to 76,469 million by the end of 2024. This indicates a reduction in asset base when goodwill is excluded, with some stabilization in the later years.

Total Asset Turnover

The reported total asset turnover ratio fluctuates slightly over the period, starting at 0.47 in 2020, dipping to 0.43 in 2021, peaking at 0.48 in 2022, and then stabilizing at around 0.46 through 2023 and 2024. This suggests a relatively stable efficiency in using total assets to generate revenues, with minor variances.

Adjusted total asset turnover ratios are markedly higher than the reported figures throughout the period, beginning at 0.76 in 2020, remaining steady at 0.75 in 2021, rising to 0.85 in 2022, and then slightly declining and stabilizing at 0.82 in 2023 and 2024. This higher ratio after goodwill adjustment indicates improved asset utilization efficiency when intangible assets such as goodwill are excluded, highlighting the company's core asset performance.

Overall Insights

The data reveals a contraction in both reported and adjusted assets through 2022, followed by modest growth in subsequent years. The total asset turnover ratios reflect that, despite asset base fluctuations, operational efficiency remains comparatively steady when considering reported assets, and shows better performance when goodwill-related adjustments are applied. This suggests that goodwill accounts for a significant portion of total assets but may not contribute proportionally to revenue generation efficiency. The company appears to be managing its core assets more effectively post-adjustment, maintaining strong turnover ratios amid the observed asset base changes.

The financial data reveals several trends in both reported and goodwill-adjusted figures over the five-year period.

Total Assets

The reported total assets show a declining trend from 155,971 million US dollars at the end of 2020 to 127,243 million in 2022, followed by a subsequent increase reaching 137,175 million by the end of 2024. This indicates some volatility but a partial recovery in asset size towards the latter years. In contrast, the adjusted total assets, which exclude goodwill, demonstrate a consistent downward trend from 96,354 million in 2020 to 71,294 million in 2022, then a modest recovery to 76,469 million in 2024. The adjusted assets remain significantly lower than reported assets throughout the period, reflecting a substantial reduction when goodwill is excluded.

Stockholders’ Equity

Reported total stockholders’ equity shows a slight decrease from 20,597 million in 2020 to 18,901 million in 2021, followed by a steady increase reaching 27,307 million by 2024. This upward trend suggests improved equity financing or retained earnings accumulation in recent years. Conversely, the adjusted total stockholders’ equity is negative across all years, moving from -39,020 million to -33,399 million, indicating that after removing goodwill, liabilities exceed adjusted assets by a significant margin. The negative equity-adjusted figures denote possible impairment or overvaluation of goodwill and intangibles in the reported figures.

Financial Leverage

The reported financial leverage ratio steadily decreases from 7.57 in 2020 to 5.02 in 2024. This indicates a reduction in the company’s use of debt relative to equity over time, suggesting an improvement in the capital structure or deleveraging strategy. The absence of data for adjusted financial leverage precludes direct analysis, but given the negative adjusted equity, any leverage ratio calculation excluding goodwill would likely be materially different and potentially less stable.

Overall, the analysis highlights that while reported figures suggest growth in equity and a reduction in leverage, the adjusted data presents a more cautious picture with continued negative equity and lower asset values. These disparities underscore the importance of considering goodwill and intangible asset adjustments when evaluating financial health and capital structure stability over time.

Reported Total IBM Stockholders’ Equity

The reported total stockholders’ equity showed a fluctuating trend over the five-year period. Starting at 20,597 million US dollars in 2020, it declined to 18,901 million in 2021, reflecting a decrease in equity. Subsequently, it increased to 21,944 million in 2022 and continued a moderate rise to 22,533 million in 2023. The most significant increase occurred in 2024, reaching 27,307 million. This indicates a recovery and a strengthening of equity position by the end of the period.

Adjusted Total IBM Stockholders’ Equity

The adjusted total stockholders’ equity, which accounts for goodwill adjustments, remained negative throughout the period. Starting at -39,020 million US dollars in 2020, the negative value slightly improved to -36,742 million in 2021 and -34,005 million in 2022, indicating a reduction in net goodwill impairment or related adjustments. However, this trend reversed in 2023, with the adjusted equity worsening to -37,645 million before partially recovering to -33,399 million in 2024. The persistent negative adjusted equity suggests underlying accounting or valuation challenges related to intangible assets.

Reported Return on Equity (ROE)

The reported ROE exhibited considerable volatility. It started at a strong 27.14% in 2020 and increased to 30.38% in 2021. In 2022, there was a sharp decline to only 7.47%, indicating a significant drop in profitability relative to equity. The following year, ROE surged to 33.29%, the highest in the reported period, before falling again to 22.06% in 2024. These fluctuations suggest variability in earnings performance and efficiency in generating profits from shareholders' equity.

Adjusted Return on Equity (ROE)

No data is available for the adjusted ROE, so no analysis can be conducted on the profitability measure after goodwill adjustments.

Total Assets

Reported total assets declined significantly from 155,971 million US dollars in 2020 to 132,001 million in 2021 and further decreased to 127,243 million in 2022. However, a reversal occurred in 2023 and 2024 with reported total assets rising to 135,241 million and 137,175 million respectively, indicating a recovery trend after two years of reduction.

Adjusted total assets, which remove goodwill and possibly other intangible assets, exhibit a consistent downward trend from 96,354 million in 2020 to 76,358 million in 2021, continuing to 71,294 million in 2022. A moderate recovery is observed in 2023 and 2024, reaching 75,063 million and 76,469 million respectively, mirroring the pattern in reported total assets but at a lower base.

Return on Assets (ROA)

The reported ROA metric shows variability over the five-year period. After increasing from 3.58% in 2020 to 4.35% in 2021, it dropped sharply to 1.29% in 2022. Subsequently, it rose markedly to 5.55% in 2023 before slightly decreasing to 4.39% in 2024. This suggests fluctuating profitability relative to total assets during the period.

Adjusted ROA presents a similar trend but at consistently higher levels. Starting at 5.8% in 2020, it climbed to 7.52% in 2021 and then sharply dropped to 2.3% in 2022. A strong rebound is seen with 9.99% in 2023, though it decreases somewhat to 7.88% in 2024. The adjusted ROA being higher indicates that excluding goodwill and related adjustments enhances the apparent asset profitability.

Summary Insights

The data demonstrates an initial asset contraction phase in both reported and adjusted measures between 2020 and 2022, followed by a recovery phase from 2023 to 2024. The return on assets metrics reflect profitability volatility, with a notable dip in 2022 and recovery thereafter. Adjusted figures consistently indicate stronger performance compared to reported figures, highlighting the impact of goodwill and intangible asset adjustments on asset base and profitability calculations.