IBM beat earnings expectations and raised its full-year guidance, helped by strong sales of its computers and software. Its shares rebounded in after-hours trading.
The tech company reported earnings excluding items rose to $3.09 from $2.61 a share in the year-earlier period.
The company also said signings of new business at its services division surged more than expected during the second quarter, and raised its full-year guidance by 10 cents to $13.25 a share; analysts had expected $13.22 a share.
Revenue for the quarter increased 13 percent to $26.67 billion from $23.72 billion a year ago. IBM said it logged double-digit percent increases for sales of hardware, software and services.
Analysts had expected IBM to report earnings of $3.03 a share on revenue of $25.3 billion, according to Thomson Reuters.
"IBM's results in my view satisfied my expectations as a shareholder and as I look for the balance of the earnings reports this week, I think it's going to set a pretty good tone," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management. "It was a solid report. They not only exceeded expectations on the top line, they exceeded expectations on the net ... Backlog on the services side was better than expected."
The resulted included a one-time charge of 10 cents a share for the amortization of purchased intangible assets and other acquisition-related charges, as well as a one-time gain of 1 cent a share for changes related to fluctuations in its retirement plan holidings due to market activity.
Net income rose to $3.66 billion, or $3 a share, from $3.39 billion, or $2.61 a share, in the year-earlier quarter.
The company's gross profit margins increased nearly 1 percent to 46.4 percent.
Signings for new business, a gauge closely watched by analysts, rose 16 percent to $14.3 billion. That eased investor concerns after the number dropped in the first quarter.
Deutsche Bank had said in a research note that Wall Street expectations were for signings of $12 billion to $13 billion.
Investors believe that signings is a key indicator of future profits. But IBM says the focus should be more on total backlog of business, which grew by $15 billion during the quarter to $144 billion.
IBM shares ended slightly lower in regular trading Monday, but rebounded after the company's earnings report. Click here for the latest after-hour quotes for IBM here.
IBM's results came after a strong report from chip giant Intel that showed consumers and enterprises have been spending more on tech services.
The new version of Microsoft Office will also hit the markets in a few weeks and could spark an increase in buying from corporate clients for IBM.