IBM earnings beat estimates on cloud strength
IBM posted quarterly revenue and profit above analysts’ estimates today, riding on the strength of its high-margin cloud computing business.
IBM has jettisoned some of its legacy business to focus on cloud computing, an area that has seen a lot of action in recent years as companies ramp up their digital shift to control costs and boost efficiency.
Shares in the company jumped more than six per cent in after-hours trading as investors lapped up the results.
Revenue from the cloud business, previously headed by IBM’s new boss Arvind Krishna, rose 30 per cent to $6.3bn in the second quarter.
Krishna took over as chief executive officer from Ginni Rometty in April, while appointing former Bank of America’s top technology executive Howard Boville as the new head of IBM’s cloud business.
“As we got into the latter half of the second quarter, we saw a marked inflection in clients’ acceleration to digital transformation and cloud. And you saw that play out in our cloud performance, which was up very nicely,” chief financial officer James Kavanaugh told Reuters.
IBM’s total revenue fell 5.4 per cent to $18.12bn in the quarter, but came in above analysts’ estimates of $17.72bn, according to IBES data from Refinitiv.
Excluding the impact from currency and business divestitures, revenue declined 1.9 per cent.
IBM’s global business services unit was impacted as clients cut or delayed spending on discretionary projects due to Covid-19, Kavanaugh said. Sales in the unit fell seven per cent to $3.9bn.
While western Europe and Asia Pacific showed a pickup in client spending during June, US and Latin America customers pulled back as the pandemic impact got worse, Kavanaugh said.
The company’s net income fell to $1.36bn, or $1.52 per share, in the quarter ended 30 June from $2.5bn, or $2.81 per share, a year earlier.
Excluding items, the company earned $2.18 per share, above estimates of $2.07 per share.