Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
International Business Machines Corp., profitability ratios
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Gross Profit Margin
- The gross profit margin exhibits a consistent upward trend over the period, rising from 48.32% in 2020 to 56.65% in 2024. This indicates improving efficiency in producing goods or services relative to cost of goods sold, suggesting enhanced pricing power or cost management.
- Operating Profit Margin
- The operating profit margin shows steady improvement from 9.22% in 2020 to a peak of 15.17% in 2023, followed by a slight decline to 14.95% in 2024. Overall, the margin has increased significantly, reflecting better control over operating expenses or increased operational efficiency.
- Net Profit Margin
- The net profit margin follows a more volatile pattern with an initial increase from 7.59% in 2020 to 10.01% in 2021, a sharp drop to 2.71% in 2022, and then a recovery to 12.13% in 2023 before declining slightly to 9.6% in 2024. This variability suggests fluctuations in non-operating items, taxes, or extraordinary expenses impacting final profitability.
- Return on Equity (ROE)
- Return on equity displays considerable fluctuation throughout the timeframe. Starting at 27.14% in 2020, it rises to 30.38% in 2021, declines sharply to 7.47% in 2022, and then rebounds to 33.29% in 2023 before falling again to 22.06% in 2024. The variations point to changing effectiveness in generating profit from shareholders' equity, possibly influenced by net income swings or equity changes.
- Return on Assets (ROA)
- Return on assets trends similarly with initial growth from 3.58% in 2020 to 4.35% in 2021, a decline to 1.29% in 2022, followed by a recovery to 5.55% in 2023 and a slight decrease to 4.39% in 2024. This suggests fluctuations in asset utilization efficiency in generating profit, consistent with the observed net profit margin trends.
Return on Sales
Return on Investment
Gross Profit Margin
International Business Machines Corp., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 35,551) | 34,300) | 32,687) | 31,486) | 35,575) | |
| Revenue | 62,753) | 61,860) | 60,530) | 57,350) | 73,620) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 56.65% | 55.45% | 54.00% | 54.90% | 48.32% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Accenture PLC | 32.61% | 32.34% | 31.99% | 32.38% | 31.53% | |
| Adobe Inc. | 89.04% | 87.87% | 87.70% | 88.18% | 86.62% | |
| Cadence Design Systems Inc. | 86.05% | 89.36% | 89.57% | 89.73% | 88.61% | |
| CrowdStrike Holdings Inc. | 75.27% | 73.17% | 73.60% | 73.75% | 70.58% | |
| Fair Isaac Corp. | 79.73% | 79.45% | 78.06% | 74.75% | 72.10% | |
| Intuit Inc. | 78.72% | 78.13% | 81.09% | 82.53% | 82.05% | |
| Microsoft Corp. | 69.76% | 68.92% | 68.40% | 68.93% | 67.78% | |
| Oracle Corp. | 71.41% | 72.85% | 79.08% | 80.59% | 79.68% | |
| Palantir Technologies Inc. | 80.25% | 80.62% | 78.56% | 77.99% | 67.74% | |
| Palo Alto Networks Inc. | 74.35% | 72.29% | 68.76% | 70.05% | 70.68% | |
| Salesforce Inc. | 75.50% | 73.34% | 73.48% | 74.41% | 75.23% | |
| ServiceNow Inc. | 79.18% | 78.59% | 78.29% | 77.05% | 78.16% | |
| Synopsys Inc. | 79.68% | 79.08% | 79.07% | 79.50% | 78.44% | |
| Workday Inc. | 75.60% | 72.41% | 72.21% | 72.25% | 70.63% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 35,551 ÷ 62,753 = 56.65%
2 Click competitor name to see calculations.
The financial data indicates several notable trends over the five-year period ending December 31, 2024. Revenue experienced a significant decline from 2020 to 2021, dropping from 73,620 million USD to 57,350 million USD. However, starting in 2021, revenue demonstrated a gradual recovery, increasing each year to reach 62,753 million USD by the end of 2024. Despite this recovery, revenue in 2024 remained below the 2020 level.
Gross profit figures showed a somewhat different trajectory. After a decrease from 35,575 million USD in 2020 to 31,486 million USD in 2021, gross profit began to rise again in subsequent years. By 2024, gross profit had nearly returned to its 2020 level, reaching 35,551 million USD. This pattern suggests an improvement in the company's cost management or product mix over time.
Gross profit margin percentages exhibited a consistent upward trend throughout the period. Beginning at 48.32% in 2020, the margin increased substantially to 54.9% in 2021, then maintained a steady incremental rise each year, culminating at 56.65% in 2024. This increase in gross profit margin amidst fluctuating revenue and gross profit levels indicates enhanced efficiency, potentially through higher-margin products, reduced costs, or pricing power.
- Revenue Trend
- Sharp decline in 2021 followed by gradual recovery through 2024, yet still below 2020 levels.
- Gross Profit Trend
- Decrease in 2021 followed by recovery, nearly reaching pre-decline levels by 2024.
- Gross Profit Margin Trend
- Consistent and significant increase over the full period, indicating improved operational efficiency or favorable product mix.
Overall, the data reflects an initial downturn in top-line revenue and gross profit in 2021, with a subsequent recovery and marked improvement in profitability ratios. The sustained increase in gross profit margin despite fluctuating revenue suggests the company may have successfully implemented strategies enhancing cost control and efficiency or shifted towards more profitable product segments during this timeframe.
Operating Profit Margin
International Business Machines Corp., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 9,380) | 9,382) | 8,174) | 6,865) | 6,786) | |
| Revenue | 62,753) | 61,860) | 60,530) | 57,350) | 73,620) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 14.95% | 15.17% | 13.50% | 11.97% | 9.22% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Accenture PLC | 14.79% | 13.74% | 15.21% | 15.08% | 14.69% | |
| Adobe Inc. | 31.35% | 34.26% | 34.64% | 36.76% | 32.93% | |
| Cadence Design Systems Inc. | 29.10% | 30.59% | 30.15% | 26.07% | 24.06% | |
| CrowdStrike Holdings Inc. | -0.07% | -8.48% | -9.82% | -10.58% | -30.34% | |
| Fair Isaac Corp. | 42.71% | 42.47% | 39.38% | 38.40% | 22.86% | |
| Intuit Inc. | 22.29% | 21.86% | 20.20% | 25.95% | 28.34% | |
| Microsoft Corp. | 44.64% | 41.77% | 42.06% | 41.59% | 37.03% | |
| Oracle Corp. | 28.99% | 26.21% | 25.74% | 37.58% | 35.57% | |
| Palantir Technologies Inc. | 10.83% | 5.39% | -8.46% | -26.66% | -107.41% | |
| Palo Alto Networks Inc. | 8.52% | 5.62% | -3.43% | -7.15% | -5.25% | |
| Salesforce Inc. | 14.38% | 3.29% | 2.07% | 2.14% | 1.74% | |
| ServiceNow Inc. | 12.42% | 8.49% | 4.90% | 4.36% | 4.40% | |
| Synopsys Inc. | 22.13% | 21.72% | 22.87% | 17.48% | 16.83% | |
| Workday Inc. | 2.52% | -3.57% | -2.27% | -5.76% | -13.85% | |
| Operating Profit Margin, Sector | ||||||
| Software & Services | 30.41% | 27.43% | 27.41% | 28.21% | 24.17% | |
| Operating Profit Margin, Industry | ||||||
| Information Technology | 26.62% | 24.49% | 26.43% | 26.73% | 22.69% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × 9,380 ÷ 62,753 = 14.95%
2 Click competitor name to see calculations.
The data reveals several noteworthy trends in the financial performance over the analyzed periods.
- Operating Income
- Operating income shows a consistent upward trend from 2020 through 2023, increasing from 6,786 million to 9,382 million US dollars. However, it slightly decreases by 2 million US dollars in 2024, effectively stabilizing after the previous growth. This pattern suggests a phase of expansion followed by a plateau in operating income.
- Revenue
- Revenue exhibits a notable decline from 73,620 million US dollars in 2020 to 57,350 million US dollars in 2021, indicating a significant drop in the initial phase. Thereafter, revenue gradually recovers over the subsequent years, rising to 62,753 million US dollars by 2024, but it remains below the 2020 level. This trend reflects initial contraction followed by a slow and moderate recovery.
- Operating Profit Margin
- The operating profit margin shows a consistent and strong upward trend throughout the period under review, increasing from 9.22% in 2020 to a peak of 15.17% in 2023. It slightly decreases to 14.95% in 2024, maintaining a significantly higher level compared to 2020. This suggests improved operational efficiency or cost management contributing to profitability, despite fluctuations in revenue.
Overall, the company demonstrates improving operational profitability as indicated by rising operating income and profit margin, despite a significant hit to revenue in 2021 and a gradual recovery thereafter. The operating profit margin's increase underscores stronger cost control or pricing power. The stabilization of operating income and slight margin dip in 2024 may indicate emerging pressures or market conditions warranting further observation.
Net Profit Margin
International Business Machines Corp., net profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | 6,023) | 7,502) | 1,639) | 5,743) | 5,590) | |
| Revenue | 62,753) | 61,860) | 60,530) | 57,350) | 73,620) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 9.60% | 12.13% | 2.71% | 10.01% | 7.59% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Accenture PLC | 11.19% | 10.72% | 11.17% | 11.69% | 11.52% | |
| Adobe Inc. | 25.85% | 27.97% | 27.01% | 30.55% | 40.88% | |
| Cadence Design Systems Inc. | 22.74% | 25.46% | 23.84% | 23.29% | 22.02% | |
| CrowdStrike Holdings Inc. | 2.92% | -8.18% | -16.18% | -10.59% | -29.45% | |
| Fair Isaac Corp. | 29.86% | 28.37% | 27.12% | 29.78% | 18.26% | |
| Intuit Inc. | 18.19% | 16.59% | 16.23% | 21.41% | 23.78% | |
| Microsoft Corp. | 35.96% | 34.15% | 36.69% | 36.45% | 30.96% | |
| Oracle Corp. | 19.76% | 17.02% | 15.83% | 33.96% | 25.94% | |
| Palantir Technologies Inc. | 16.13% | 9.43% | -19.61% | -33.75% | -106.75% | |
| Palo Alto Networks Inc. | 32.11% | 6.38% | -4.85% | -11.72% | -7.83% | |
| Salesforce Inc. | 11.87% | 0.66% | 5.45% | 19.16% | 0.74% | |
| ServiceNow Inc. | 12.97% | 19.30% | 4.49% | 3.90% | 2.62% | |
| Synopsys Inc. | 36.94% | 21.05% | 19.38% | 18.02% | 18.03% | |
| Workday Inc. | 19.02% | -5.90% | 0.57% | -6.54% | -13.25% | |
| Net Profit Margin, Sector | ||||||
| Software & Services | 24.73% | 21.95% | 21.72% | 25.30% | 20.05% | |
| Net Profit Margin, Industry | ||||||
| Information Technology | 20.64% | 20.39% | 22.45% | 23.62% | 19.67% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
Net profit margin = 100 × Net income attributable to IBM ÷ Revenue
= 100 × 6,023 ÷ 62,753 = 9.60%
2 Click competitor name to see calculations.
- Revenue Trends
- Revenue shows a notable fluctuation over the five-year period. It started at 73,620 million USD in 2020 and experienced a significant decline to 57,350 million USD in 2021. After this drop, the revenue showed a gradual recovery, increasing to 60,530 million USD in 2022, then modestly rising to 61,860 million USD in 2023, and further to 62,753 million USD in 2024. Despite this recovery trend, the revenue in 2024 did not return to the peak observed in 2020.
- Net Income Trends
- Net income exhibits considerable volatility during the period. In 2020, net income was 5,590 million USD, rising slightly to 5,743 million USD in 2021. However, there was a sharp decrease in 2022 to 1,639 million USD. Following this decline, net income rebounded substantially in 2023, reaching 7,502 million USD, which is the highest value within the timeframe. This was followed by a decrease to 6,023 million USD in 2024, though still above the earlier years except for 2023.
- Net Profit Margin Trends
- The net profit margin pattern aligns closely with fluctuations in net income. The margin was 7.59% in 2020, increasing to 10.01% in 2021. A steep drop to 2.71% occurred in 2022, paralleling the decline in net income. The margin then rose sharply to 12.13% in 2023, the highest during the period, before declining to 9.6% in 2024. These fluctuations indicate variability in profitability relative to revenue over the years.
- Overall Analysis
- The financial data reveal a period of instability with a significant dip in both revenue and net income in 2021 and 2022, particularly pronounced in net income and profit margin. Recovery is evident in 2023, with peak net income and profit margin values, followed by a partial decline in 2024. The revenue trend shows a pronounced initial decline with a steady but slow recovery that, as of 2024, remains below the level of 2020. The volatility in profitability suggests factors impacting operating efficiency or cost management during these years.
Return on Equity (ROE)
International Business Machines Corp., ROE calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | 6,023) | 7,502) | 1,639) | 5,743) | 5,590) | |
| Total IBM stockholders’ equity | 27,307) | 22,533) | 21,944) | 18,901) | 20,597) | |
| Profitability Ratio | ||||||
| ROE1 | 22.06% | 33.29% | 7.47% | 30.38% | 27.14% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Accenture PLC | 25.68% | 26.75% | 31.11% | 30.25% | 30.05% | |
| Adobe Inc. | 39.42% | 32.86% | 33.85% | 32.59% | 39.66% | |
| Cadence Design Systems Inc. | 22.58% | 30.58% | 30.93% | 25.39% | 23.69% | |
| CrowdStrike Holdings Inc. | 3.88% | -12.52% | -22.89% | -10.64% | -19.10% | |
| Fair Isaac Corp. | — | — | — | — | 71.41% | |
| Intuit Inc. | 16.07% | 13.81% | 12.57% | 20.89% | 35.76% | |
| Microsoft Corp. | 32.83% | 35.09% | 43.68% | 43.15% | 37.43% | |
| Oracle Corp. | 120.26% | 792.45% | — | 262.43% | 83.94% | |
| Palantir Technologies Inc. | 9.24% | 6.04% | -14.57% | -22.71% | -76.61% | |
| Palo Alto Networks Inc. | 49.86% | 25.15% | -127.14% | -78.63% | -24.23% | |
| Salesforce Inc. | 6.93% | 0.36% | 2.48% | 9.81% | 0.37% | |
| ServiceNow Inc. | 14.83% | 22.69% | 6.46% | 6.22% | 4.18% | |
| Synopsys Inc. | 25.17% | 20.01% | 17.85% | 14.31% | 13.54% | |
| Workday Inc. | 17.09% | -6.57% | 0.65% | -8.62% | -19.33% | |
| ROE, Sector | ||||||
| Software & Services | 28.71% | 28.63% | 31.20% | 36.34% | 30.37% | |
| ROE, Industry | ||||||
| Information Technology | 29.37% | 32.00% | 39.15% | 42.48% | 35.75% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders’ equity
= 100 × 6,023 ÷ 27,307 = 22.06%
2 Click competitor name to see calculations.
- Net Income attributable to IBM
- The net income shows significant fluctuations over the five-year period. Starting at 5,590 million US dollars in 2020, it slightly increased to 5,743 million in 2021. However, there was a sharp decline in 2022 to 1,639 million, followed by a strong rebound in 2023 reaching 7,502 million. In 2024, net income decreased again to 6,023 million. This pattern indicates volatility in earnings with a notable low point in 2022.
- Total IBM Stockholders’ Equity
- The total stockholders’ equity experienced a general upward trend despite some fluctuations. It decreased from 20,597 million US dollars in 2020 to 18,901 million in 2021 but then increased consecutively in the following years, reaching 21,944 million in 2022, 22,533 million in 2023, and further rising to 27,307 million in 2024. This suggests growth in the company’s net assets over time.
- Return on Equity (ROE)
- Return on equity exhibited considerable variability during the period. The ROE was high at 27.14% in 2020, increased to 30.38% in 2021, then dropped sharply in 2022 to 7.47%. Subsequently, ROE surged to 33.29% in 2023 but declined to 22.06% in 2024. The movements in ROE largely reflect the changes observed in net income, indicating fluctuating profitability relative to equity.
- Overall Analysis
- The financial data illustrates a pattern of earnings volatility juxtaposed with a general increase in equity base. The significant dip in net income and ROE in 2022 suggests a challenging year for profitability, while the recovery in 2023 indicates a strong operational turnaround. The growth in stockholders’ equity implies increased shareholder value over the long term, albeit with varying returns on that equity. These trends highlight the company's resilience but also signal the importance of managing profit stability in the future.
Return on Assets (ROA)
International Business Machines Corp., ROA calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to IBM | 6,023) | 7,502) | 1,639) | 5,743) | 5,590) | |
| Total assets | 137,175) | 135,241) | 127,243) | 132,001) | 155,971) | |
| Profitability Ratio | ||||||
| ROA1 | 4.39% | 5.55% | 1.29% | 4.35% | 3.58% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Accenture PLC | 12.99% | 13.41% | 14.55% | 13.68% | 13.78% | |
| Adobe Inc. | 18.39% | 18.23% | 17.51% | 17.70% | 21.66% | |
| Cadence Design Systems Inc. | 11.76% | 18.36% | 16.53% | 15.87% | 14.95% | |
| CrowdStrike Holdings Inc. | 1.34% | -3.65% | -6.49% | -3.39% | -10.09% | |
| Fair Isaac Corp. | 29.85% | 27.26% | 25.90% | 25.01% | 14.72% | |
| Intuit Inc. | 9.22% | 8.58% | 7.45% | 13.29% | 16.70% | |
| Microsoft Corp. | 17.21% | 17.56% | 19.94% | 18.36% | 14.70% | |
| Oracle Corp. | 7.42% | 6.33% | 6.15% | 10.48% | 8.78% | |
| Palantir Technologies Inc. | 7.29% | 4.64% | -10.80% | -16.02% | -43.35% | |
| Palo Alto Networks Inc. | 12.89% | 3.03% | -2.18% | -4.87% | -2.95% | |
| Salesforce Inc. | 4.14% | 0.21% | 1.52% | 6.14% | 0.23% | |
| ServiceNow Inc. | 6.99% | 9.96% | 2.44% | 2.13% | 1.36% | |
| Synopsys Inc. | 17.31% | 11.90% | 10.45% | 8.66% | 8.27% | |
| Workday Inc. | 8.39% | -2.72% | 0.28% | -3.24% | -7.05% | |
| ROA, Sector | ||||||
| Software & Services | 12.19% | 11.21% | 11.41% | 12.29% | 9.68% | |
| ROA, Industry | ||||||
| Information Technology | 11.95% | 12.52% | 14.57% | 14.67% | 11.45% | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 2024 Calculation
ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × 6,023 ÷ 137,175 = 4.39%
2 Click competitor name to see calculations.
- Net Income Attributable to IBM
- The net income showed fluctuation over the five-year period. It increased moderately from 5590 million US dollars in 2020 to 5743 million in 2021. A sharp decline occurred in 2022, dropping to 1639 million. This was followed by a significant rebound in 2023, reaching 7502 million, which is the highest value in the period. In 2024, net income decreased again to 6023 million but remained above the levels seen in 2020 and 2021.
- Total Assets
- Total assets exhibited a downward trend from 155971 million US dollars in 2020 to 127243 million in 2022, indicating a reduction in asset base over these years. However, assets increased slightly in 2023 to 135241 million and continued to grow modestly to 137175 million in 2024, suggesting stabilization and some recovery in asset size after the previous decline.
- Return on Assets (ROA)
- ROA, expressed as a percentage, reflected changes in profitability relative to the asset base. The ratio increased from 3.58% in 2020 to 4.35% in 2021, then dropped substantially to 1.29% in 2022, aligning with the net income decline for that year. A sharp increase to 5.55% in 2023 corresponded with the spike in profitability. In 2024, ROA declined to 4.39% but remained above the initial years, indicating a relatively strong asset profitability despite fluctuations.
- Overall Insights
- The data reveal volatility in profitability and asset levels over the given timeframe. The notable drop in net income and ROA in 2022 suggests an operational or market challenge during that period, followed by a robust recovery in 2023. The stabilization and mild growth in total assets indicate management efforts to rebuild or optimize the asset portfolio post-2022. The trends imply a resilient financial performance with periods of stress and recovery within the observed years.