IBM surprises market with higher revenue by Cloud computing

By Rahul Vaimal, Associate Editor
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US-based multinational technology company International Business Machines (IBM) reported that it has beat its second-quarter profit estimates, indicating that the firm’s cloud storage sector is receiving a boost from the global shift to digital platforms.

In extended trading, IBM shares increased by as much as 6% after the company reported earnings in the second quarter that were better than analysts had expected.

In order to direct more of its attention towards high-margin cloud computing, an area that has seen a lot of action in recent years as businesses ramp up their digital shift to boost efficiency, the company had discarded many of its legacy businesses.

Aravind Krishna, IBM’s new boss said “the trend we see in the market is clear. Clients want to modernize apps, move more workloads to the cloud and automate IT tasks.” He was speaking on a post-earnings call with analysts.

Revenue from the cloud segment, previously led by Krishna, rose in the second quarter by 30% to $6.3 billion.

In April Arvind Krishna took over as chief executive of IBM after moving from Ginni Rometty. The top technology executive of former Bank of America Corp, Howard Boville, was appointed as the new head of the cloud business.

James Kavanaugh, the CFO was of the opinion that the budget cuts from the client-side and reduced spending on discretionary projects due to COVID-19 contributed to IBM’s global business services unit being impacted. The unit ‘s revenues were down 7% to $3.9 billion.

Mr. Kavanaugh added that although Western Europe and Asia Pacific saw an increase in client spending during June, clients from the U.S. and Latin America withdrew as the pandemic effect intensified.

According to IBES data from Refinitiv, IBM’s total revenue fell 5.4 percent to $18.12 billion but came in above analyst estimates of $17.72 billion. Excluding the effects of divestments in business and currency, revenue declined by 1.9%.

The company earned $2.18 per share, excluding items, above estimates of $2.07.