International Business Machines Corp. (NYSE:IBM)

Current Income Tax Expense

The current income tax expense shows fluctuation over the five-year period. It started at $2,458 million in 2020 and decreased to $1,877 million in 2021, followed by an increase to $2,251 million in 2022. The expense then rose slightly to $2,281 million in 2023, before falling again to $2,118 million in 2024. Overall, the current tax expense exhibits moderate variability but remains within a comparable range, with no consistent upward or downward trend.

Deferred Income Tax Expense

The deferred income tax expense displays significant volatility and remains negative throughout the period. It was -$3,322 million in 2020, which indicates a deferred tax benefit. This benefit diminished in 2021 to -$1,753 million but then increased in magnitude again in 2022 to -$2,877 million. In 2023, the deferred benefit substantially decreased to -$1,105 million, followed by an increase to -$2,336 million in 2024. This pattern suggests irregular adjustments in deferred tax assets or liabilities across the years, with no steady trend but rather fluctuations in deferred tax recognition.

Continuing Operations Provision for (Benefit from) Income Taxes

The continuing operations provision, which combines current and deferred tax effects, exhibits notable variability and changes in sign throughout the period. The provision started with a benefit (negative amount) of -$864 million in 2020, switched to a small expense of $124 million in 2021, and reverted to a larger benefit of -$626 million in 2022. In 2023, there was a significant tax expense of $1,176 million, followed by a moderate tax benefit of -$218 million in 2024. These fluctuations likely reflect the combined impact of changes in current and deferred taxes, as well as underlying operational performance and tax planning strategies.

Insights

The data reveals that deferred taxes have a greater magnitude of fluctuation compared to current taxes, indicating significant timing differences or adjustments in tax positions. The shifting nature of the continuing operations tax provision highlights variability in the company’s effective tax rate and possibly one-time or extraordinary items affecting tax expense. The overall pattern suggests cautious attention should be paid to factors influencing deferred taxes and the consistency of underlying profit before tax to better understand future income tax expense trends.

The data reveals fluctuations in various tax-related rates and incentives over the five-year period from 2020 to 2024. The statutory U.S. federal tax rate remains stable at 21% throughout the entire period, indicating no change in the baseline federal tax obligation.

Tax differential on foreign income:

This rate exhibits notable variability, starting at -15% in 2020, improving to -10% in 2021, then sharply decreasing to -29% in 2022. The figure rises sharply to -3% in 2023, before falling again to -13% in 2024. These fluctuations suggest changing benefits or losses associated with foreign income, possibly due to shifts in international tax environments or company operations abroad.

Intra-entity IP sale:

Data is only available for 2020 at -20%, with missing values thereafter. The negative value in 2020 may indicate tax planning activities related to intellectual property transfers within the company.

Domestic incentives:

These incentives show variability, starting at -4% in 2020, slightly increasing in magnitude to -5% in 2021, then significantly dropping to -24% in 2022. It rebounds to -5% in 2023 and -7% in 2024. The sharp decrease in 2022 could indicate heightened domestic tax benefits or credits claimed in that year, followed by a return to a more moderate level.

State and local taxes:

Values fluctuate with missing data for some years. Reported figures are absent for 2020, -3% for 2021, recovering to -21% in 2022, missing again for 2023, and then -2% in 2024. This inconsistency and occasional steep changes suggest fluctuating state and local tax impacts, possibly linked to location-specific operations or tax legislation.

Other adjustments:

This category varies modestly with small negative values in 2020 (-1%), 2022 (-1%), and 2024 (-3%), a zero or absent value in 2021, and a positive 1% in 2023. These minor fluctuations may represent miscellaneous tax items that have limited impact on overall tax rates.

Effective tax rate:

The effective tax rate experiences significant volatility. It starts with a negative effective tax rate of -19% in 2020 (suggesting tax benefits exceeding tax liabilities), shifts to a positive 3% in 2021, plunges to a substantially negative -54% in 2022, rises to 14% in 2023, and declines slightly below zero to -4% in 2024. Such wide swings indicate substantial variability in tax expense recognition, likely driven by the notable changes in tax differentials, domestic incentives, and state/local tax treatments.

The financial data reveals distinct patterns and shifts across several key asset and liability categories over the five-year period.

Retirement benefits

The gross retirement benefits liability decreased significantly from 3,946 million USD in 2020 to 1,898 million USD by 2024, indicating a reduction in pension obligations or related provisions. The associated deferred tax asset linked to retirement benefits decreased from -1,221 million USD to -1,478 million USD, suggesting lower deductible temporary differences related to these benefits.

Leases

Lease-related assets declined from 1,525 million USD in 2020 to a low of 927 million USD in 2022 but subsequently increased to 1,157 million USD in 2024. Correspondingly, lease liabilities decreased initially but rose again, indicating adjustments in right-of-use assets and lease obligations, possibly reflecting new lease agreements or accounting policy changes.

Share-based and other compensation

There was an upward trend in share-based and other compensation expenses, rising steadily from 616 million USD in 2020 to 796 million USD in 2024. This suggests increased employee incentive costs over time.

Tax losses/credits

The value of tax loss carryforwards and credits demonstrated continuous growth from 2,564 million USD to 3,615 million USD, indicating accumulating tax assets potentially available to offset future taxable income.

Deferred income

Deferred income figures experienced minor fluctuations but generally increased from 712 million USD to 790 million USD, implying a rise in unearned revenues recognized as liabilities.

Bad debt, inventory, and warranty reserves

These reserves sharply declined from 361 million USD to 198 million USD, reflecting improvements in credit quality, inventory management, or reduced warranty obligations.

Depreciation

Depreciation expense showed a downward trend from 308 million USD to a low of 205 million USD in 2023, with a slight rise to 238 million USD in 2024. The related deferred tax asset decreased from -709 million USD to -438 million USD, aligning with changes in property and equipment values.

Accruals (including restructuring charges)

Accruals peaked at 785 million USD in 2020, then declined to 316 million USD in 2022 before a gradual increase to 395 million USD by 2024. This pattern indicates fluctuating provisions possibly tied to restructuring or other operational contingencies.

Intangible assets and Capitalized research and development (R&D)

Intangible assets declined steadily from 3,540 million USD in 2020 to 2,482 million USD in 2024, which may indicate amortization or impairment of acquired intangibles. Conversely, capitalized R&D assets exhibited strong growth from 1,387 million USD to 4,185 million USD, reflecting significant investments in internal development and innovation.

Other assets and liabilities

Other assets decreased from 2,017 million USD to 783 million USD, while certain other liabilities showed modest reduction from -946 million USD to -746 million USD, demonstrating shifts in miscellaneous asset and liability accounts.

Deferred tax assets and liabilities

Gross deferred tax assets declined from 17,761 million USD to 16,537 million USD, with a valuation allowance fluctuating but ending higher at -1,223 million USD, indicating cautious recognition of recoverable deferred tax assets. Net deferred tax assets decreased initially but rebounded to 15,314 million USD by 2024. Gross deferred tax liabilities decreased significantly, from -13,142 million USD to -9,151 million USD. As a result, net deferred tax assets (liabilities) improved from 3,769 million USD to 6,163 million USD, reflecting favorable net timing difference positions.

Goodwill and related intangible deferred tax assets

Goodwill and intangible asset deferred tax-related balances decreased in magnitude from -3,686 million USD to -3,147 million USD, showing declining temporary differences associated with acquired goodwill.

GILTI deferred taxes

Deferred tax liabilities related to Global Intangible Low-Taxed Income (GILTI) decreased considerably from -4,365 million USD to -1,200 million USD, which may indicate adjustments in foreign income tax positions or related tax strategies.

Undistributed foreign earnings and Hedging

Undistributed foreign earnings remained relatively low and stable with a slight increase in the negative position. Hedging liabilities appeared in 2022 and increased notably by 2024, from -30 million USD to -448 million USD, suggesting the growing use of hedging instruments and associated deferred tax implications.

Overall, the data portrays a strategic reduction of certain legacy liabilities such as retirement benefits and intangible assets amortization, alongside increased capitalization of R&D, reflecting a potential shift toward innovation-driven growth. Improvements in net deferred tax positions and fluctuating accruals denote active tax and risk management. The increase in share-based compensation and lease obligations may suggest changing employee incentive schemes and operational asset leasing practices. The trends collectively imply evolving financial structuring and operational emphasis over the analyzed period.

The analysis of deferred tax assets and deferred tax liabilities over the five-year period from December 31, 2020, to December 31, 2024, reveals distinct and contrasting trends.

Deferred Tax Assets

Deferred tax assets have shown a downward trend initially, decreasing from 9,241 million US dollars at the end of 2020 to 6,256 million US dollars by the end of 2022. After this decline, there is a moderate recovery observed in the subsequent years, with values increasing to 6,656 million US dollars at the end of 2023 and further to 6,978 million US dollars by the end of 2024. Overall, the deferred tax assets decreased by approximately 24.5% from 2020 to 2024.

Deferred Tax Liabilities

Deferred tax liabilities exhibit a consistent and significant decline over the entire period. The liabilities dropped from 5,472 million US dollars in 2020 to 815 million US dollars by the end of 2024. This represents an approximately 85% reduction over five years. The decline is steady year-over-year, indicating a systematic decrease in obligations related to deferred taxes.

In summary, while deferred tax assets experienced a notable decline followed by a slight rebound, deferred tax liabilities steadily diminished throughout the period. The sharp reduction in deferred tax liabilities may point to changes in the company’s tax position or asset base affecting future tax payments, whereas the pattern in deferred tax assets could reflect adjustments in timing differences or valuation allowances impacting the future tax benefits.

An analysis of the financial data reveals several key trends and variations in the company's reported and adjusted figures over the five-year period.

Total Assets

Reported total assets show a general declining trend from 155,971 million USD in 2020 to 127,243 million USD in 2022, followed by a recovery to 137,175 million USD by 2024. The adjusted total assets exhibit a similar pattern but at consistently lower values, decreasing from 146,730 million USD in 2020 to 120,987 million USD in 2022, and then increasing to 130,197 million USD in 2024.

Total Liabilities

Reported total liabilities decline from 135,244 million USD in 2020 to 105,222 million USD in 2022, and then increase somewhat to 109,783 million USD by 2024. Adjusted total liabilities follow a similar trajectory but remain slightly below the reported figures, starting at 129,772 million USD in 2020, decreasing to 102,930 million USD in 2022, and marginally rising to 108,968 million USD in 2024.

Stockholders’ Equity

Reported total stockholders’ equity presents more volatility, beginning at 20,597 million USD in 2020, dipping to 18,901 million USD in 2021, then rising sharply to 27,307 million USD by 2024. The adjusted equity figures show less pronounced fluctuations, declining from 16,828 million USD in 2020 to 15,488 million USD in 2021, recovering somewhat to 21,144 million USD in 2024, but remaining consistently below the reported values.

Net Income Attributable to IBM

Reported net income displays significant variability, with a peak of 5,743 million USD in 2021, a notable drop to 1,639 million USD in 2022, followed by a recovery to 7,502 million USD in 2023 and 6,023 million USD in 2024. The adjusted net income figures are generally lower and more volatile, starting at 2,268 million USD in 2020, increasing to 3,990 million USD in 2021, then turning negative at -1,238 million USD in 2022, before rebounding to positive values in 2023 and 2024 but remaining below the reported figures.

Overall, the data indicate a period of asset contraction until 2022 with subsequent recovery, mirrored by liabilities and equity trends. The adjusted figures consistently present a more conservative view with lower assets, liabilities, and equity, reflecting the impact of deferred income tax adjustments. Net income demonstrates considerable volatility, with adjusted values showing amplified fluctuations, including a significant loss in 2022. This suggests that tax adjustments materially affect the financial performance representation during this period.

Net Profit Margin

The reported net profit margin demonstrated variability over the years, starting at 7.59% in 2020, rising to a peak of 12.13% in 2023, before declining to 9.6% in 2024. The adjusted net profit margin followed a similar trend but with more pronounced fluctuations, showing a decline into negative territory (-2.05%) in 2022, then recovering to 10.34% in 2023, and subsequently decreasing to 5.88% in 2024. This indicates that adjustments for taxes and other factors had a significant impact on profitability measures, especially in 2022.

Total Asset Turnover

Reported total asset turnover remained relatively stable, fluctuating narrowly between 0.43 and 0.48 over the observed period. The adjusted total asset turnover was slightly higher across all years and exhibited a similar steady trend, suggesting consistent efficiency in asset utilization regardless of adjustments for reported and deferred income taxes.

Financial Leverage

There was a clear downward trend in both reported and adjusted financial leverage, with reported leverage decreasing from 7.57 in 2020 to 5.02 in 2024, and adjusted leverage declining from 8.72 to 6.16 over the same period. This reduction indicates a gradual deleveraging approach, potentially aimed at reducing risk exposure or responding to capital structure optimization strategies.

Return on Equity (ROE)

Reported ROE exhibited notable volatility, with a decline from 27.14% in 2020 to a low of 7.47% in 2022, followed by a strong recovery to 33.29% in 2023 before falling again to 22.06% in 2024. Adjusted ROE showed even greater variability, turning negative (-6.89%) in 2022, then surging to a peak of 37.58% in 2023, and decreasing to 17.44% in 2024. These swings suggest that deferred income taxes and other adjustments significantly impacted shareholder returns, highlighting periods of both weakness and strength.

Return on Assets (ROA)

Reported ROA remained low but positive throughout the period, fluctuating between 1.29% and 5.55%, peaking in 2023 before a slight decline in 2024. Adjusted ROA followed a similar pattern but included a negative return (-1.02%) in 2022, mirroring patterns seen in profitability and ROE metrics. This pattern demonstrates that asset profitability was modest but generally improved after the difficult year in 2022, aligning with overall profitability trends.

Reported Net Income Attributable to IBM

The reported net income shows significant fluctuation over the five-year period. It increased slightly from 5590 million USD in 2020 to 5743 million USD in 2021, followed by a steep decline to 1639 million USD in 2022. Subsequently, it recovered sharply to 7502 million USD in 2023 before decreasing to 6023 million USD in 2024. This pattern indicates volatility in reported earnings, with a notable downturn in 2022 and a strong rebound in the following year.

Adjusted Net Income Attributable to IBM

Adjusted net income exhibits more pronounced variability. It rose substantially from 2268 million USD in 2020 to 3990 million USD in 2021, then plunged into negative territory at -1238 million USD in 2022, indicating an adjusted loss. This was followed by a significant recovery to 6397 million USD in 2023, but the adjusted net income decreased again to 3687 million USD in 2024. The negative value in 2022 suggests the impact of unusual or non-recurring items affecting profitability.

Reported Net Profit Margin

The reported net profit margin follows a trend consistent with reported net income. It increased from 7.59% in 2020 to 10.01% in 2021, dropped sharply to 2.71% in 2022, then climbed to a peak of 12.13% in 2023 before receding to 9.6% in 2024. This margin trend underscores substantial fluctuations in profitability relative to revenue, with 2022 notably marked by a low margin.

Adjusted Net Profit Margin

Adjusted net profit margin trends reflect those of adjusted net income but with greater sensitivity to adverse events. It improved from 3.08% in 2020 to 6.96% in 2021, fell below zero to -2.05% in 2022, indicating an adjusted loss margin, then rose sharply to 10.34% in 2023, before declining to 5.88% in 2024. The negative margin in 2022 highlights the significant impact of adjustments on profitability that year.

Overall Insights

The data depicts a pattern of volatility in both reported and adjusted financial performance metrics over the period examined. The year 2022 stands out with marked declines and negative adjusted results, implying the presence of extraordinary factors affecting earnings. Both reported and adjusted figures recover in 2023, demonstrating resilience, although 2024 shows a moderate decline after that peak. Adjusted figures illustrate more pronounced swings than reported figures, suggesting that adjustments for taxes or other items materially influence the underlying net income and profit margins each year.

The data reveals a clear pattern in the asset base and asset turnover ratios over the five-year period observed.

Total Assets

The reported total assets demonstrate a declining trend from 2020 to 2022, decreasing from 155,971 million US dollars to 127,243 million US dollars. Subsequently, there is a moderate recovery in 2023 and 2024, reaching 137,175 million US dollars. The adjusted total assets follow a similar trajectory, with a decline from 146,730 million US dollars in 2020 to 120,987 million US dollars in 2022, followed by an increase up to 130,197 million US dollars by 2024. This trend indicates a contraction of the asset base during the early years, with a subsequent effort to rebuild or expand assets later.

Total Asset Turnover Ratios

Both reported and adjusted total asset turnover ratios fluctuate within a moderate range. The reported total asset turnover ratio decreases from 0.47 in 2020 to 0.43 in 2021, then rises to 0.48 in 2022 before stabilizing around 0.46 in 2023 and 2024. The adjusted total asset turnover ratio follows a slightly higher trend line, starting at 0.50 in 2020, dipping to 0.46 in 2021, increasing again to 0.50 in 2022, and maintaining 0.48 in both 2023 and 2024. These figures indicate relatively stable operational efficiency in utilizing assets to generate revenue, with minor fluctuations possibly linked to changes in asset base and market conditions.

Overall, the period under review shows an initial reduction in asset levels accompanied by a dip in asset turnover efficiency, followed by partial asset recovery and stabilization of turnovers. The adjusted figures consistently present slightly lower asset totals but slightly higher turnover ratios, suggesting refined measurements that emphasize operational productivity over raw asset size.

The analysis of the financial figures over the five-year period reveals several noteworthy trends in asset levels, equity, and leverage ratios, both reported and adjusted for deferred income tax effects.

Total Assets

Reported total assets display a declining trend from 155,971 million US dollars at the end of 2020 to 127,243 million in 2022, followed by a modest recovery to 137,175 million by the end of 2024. The adjusted total assets mirror this pattern but consistently show lower values, decreasing from 146,730 million in 2020 to 120,987 million in 2022, then increasing to 130,197 million in 2024. The adjustments suggest deferred tax impacts reduce the asset base reported on the financial statements.

Stockholders’ Equity

Reported stockholders’ equity shows a decline from 20,597 million US dollars in 2020 to 18,901 million in 2021 but then rises steadily, reaching 27,307 million in 2024. Adjusted equity follows a similar trajectory but again with lower absolute numbers, falling from 16,828 million in 2020 to 15,488 million in 2021, then rising to 21,144 million in 2024. This upward trend in equity post-2021 indicates an improvement in net asset value from retained earnings or capital injections after adjusting for deferred taxes.

Financial Leverage

Reported financial leverage, calculated as the ratio of total assets to stockholders’ equity, declines significantly from 7.57 in 2020 to 5.02 in 2024, suggesting a reduction in reliance on debt or an increase in equity relative to assets. Adjusted financial leverage ratios are consistently higher than reported ratios, beginning at 8.72 in 2020, decreasing to a low of 6.16 in 2024. This indicates that after adjusting for deferred taxes, the company remains more leveraged than the unadjusted metrics suggest, though leverage is also trending downward over the period.

In summary, the data indicate a period of contraction in asset size early in the timeline with gradual recovery in later years. Stockholders’ equity, both reported and adjusted, improves substantially after 2021, leading to a consistent decrease in financial leverage ratios. The adjustments for deferred income taxes reduce the reported asset and equity values and accordingly inflate leverage ratios, highlighting the impact of deferred tax liabilities on the company’s financial structure. Overall, the trends suggest strengthening equity positions and a modest reduction in leverage over the five-year span.

Net Income Trends

The reported net income attributable to the company showed fluctuations over the five-year period. Starting at 5,590 million USD in 2020, it slightly increased to 5,743 million USD in 2021. However, there was a sharp decline in 2022, dropping to 1,639 million USD. This was followed by a significant rebound in 2023 reaching 7,502 million USD, before decreasing again in 2024 to 6,023 million USD.

Adjusted net income reveals more volatility, beginning at 2,268 million USD in 2020 and rising notably to 3,990 million USD in 2021. It then turned negative in 2022, with a loss of 1,238 million USD, before recovering strongly to 6,397 million USD in 2023 and declining to 3,687 million USD in 2024. This suggests adjustments for tax items significantly impacted the income figures, especially in 2022.

Stockholders’ Equity Patterns

Reported total stockholders' equity exhibited an overall upward trend, starting from 20,597 million USD in 2020 and declining slightly to 18,901 million USD in 2021. It then increased steadily through 2022 and 2023, reaching 27,307 million USD by 2024. This indicates growth in equity value with some volatility in the early years.

Adjusted total stockholders’ equity values are consistently lower than the reported figures, indicating that deferred and annual tax adjustments reduce equity valuations. The adjusted equity declined from 16,828 million USD in 2020 to 15,488 million USD in 2021, followed by an increase to 17,980 million USD in 2022, a decline to 17,023 million USD in 2023, and a rise to 21,144 million USD in 2024. This pattern reflects a lagging and somewhat more volatile equity base after tax adjustments compared to reported figures.

Return on Equity (ROE) Analysis

Reported ROE fluctuated widely across the period. It was 27.14% in 2020, increased to 30.38% in 2021, dropped sharply to 7.47% in 2022, surged to 33.29% in 2023, and dropped again to 22.06% in 2024. These fluctuations correspond with the reported net income swings, suggesting variability in profitability relative to equity.

Adjusted ROE displays greater volatility and reflects the impact of tax adjustments on profitability measures. Starting at 13.48% in 2020, it nearly doubled to 25.76% in 2021, turned negative at -6.89% in 2022, then spiked to a high of 37.58% in 2023, before falling to 17.44% in 2024. The negative adjusted ROE in 2022 highlights the effect of adverse tax adjustments impacting returns on equity that year.

Overall Insights

The data shows that the company experienced significant income volatility over the five years, with the adjusted results revealing more pronounced fluctuations due to deferred and annual income tax effects. Equity values adapted to these variations but generally increased over the period, indicating underlying growth despite income disruptions. The return on equity, both reported and adjusted, mirrors these patterns, with tax adjustments significantly affecting the profitability metrics, especially in 2022. This suggests that tax items played a critical role in shaping financial performance and equity returns throughout the analyzed period.

The financial data reveals varying trends in income, assets, and returns over the five-year period from 2020 to 2024. The reported net income demonstrates fluctuations, with a peak in 2023 followed by a decline in 2024. In contrast, the adjusted net income presents a more volatile pattern, including a negative value in 2022 before recovering in subsequent years but remaining below the levels of 2020 and 2021.

Total assets, both reported and adjusted, show a general downward trend from 2020 to 2022, followed by gradual increases through 2024. The reported total assets consistently exceed the adjusted total assets each year, with the gap remaining relatively stable. This suggests adjustments primarily reduce reported asset values without dramatic changes in scale over the examined period.

Return on assets (ROA) based on reported data exhibits a fluctuating trend that corresponds with net income changes: moderate levels in 2020 and 2021, a significant decrease in 2022, a sharp increase in 2023, and a slight decline in 2024. Adjusted ROA follows a similar pattern but shows negative performance in 2022, aligning with the negative adjusted net income. The adjusted ROA recovers more modestly in the following years, consistently remaining lower than the reported ROA.

Overall, the data indicates that while the company experienced variability in profitability and asset size, the impact of adjustments related to deferred taxes is significant, especially evident in the negative adjusted net income and ROA in 2022. The recovery in adjusted figures after 2022 suggests some normalization, but the divergence between reported and adjusted metrics underscores the importance of considering tax adjustments when evaluating financial performance.

Net Income Trends

Reported net income rises from 5590 million in 2020 to a peak of 7502 million in 2023 before declining to 6023 million in 2024. Adjusted net income experiences greater volatility, reaching a low of -1238 million in 2022 and recovering thereafter, though not reaching earlier highs.

Asset Trends

Both reported and adjusted total assets decline notably between 2020 and 2022, then increase gradually through 2024. The reported asset values remain consistently higher than adjusted ones, indicating recurring deductions or adjustments for tax considerations.

Return on Assets

Reported ROA displays moderate performance initially, a sharp decline in 2022 to 1.29%, a strong rebound in 2023 at 5.55%, and a slight decrease in 2024. Adjusted ROA mirrors this pattern but shows negative return in 2022 (-1.02%) and generally lower percentages in other years.

Impact of Adjustments

The adjustments for reported income and assets have a pronounced effect on profitability metrics, highlighting the influence of deferred income taxes on the financial results and the importance of analyzing both reported and adjusted figures for a comprehensive understanding.