IBM's financial results for the second quarter of 2007 have exceeded expectations, with a net income up 12 per cent to $2.26bn, equivalent to $1.55 per share.

IBM achieved sales of $23.8bn – a rise of just under nine per cent from $21.89bn last year.

After a disappointing first quarter, analyst Thomson Financial had predicted earnings per share of $1.50, based on an estimated $21.07bn in revenue.

The IT giant reported that software sales proved to be the most profitable area of business, with sales climbing 13 per cent to $4.8bn.

'Our overall results again demonstrate the strength of our business model and our ability to achieve profitable growth and strong cash generation,' said IBM chief executive Samuel Palmisano.

IBM signed $11.7bn worth of new service contracts in the second quarter, up 22 per cent on the same period in 2006.