IBM posts double-digit cloud revenue growth; says customers deferring some projects

IBM posts double-digit cloud revenue growth; says customers deferring some projects

International Business Machines Corp edged past Wall Street estimates for quarterly revenue on Monday, bolstered by higher demand for its cloud services, a business it is staking its future on as it prepares to spin off one of its legacy units.

FILE PHOTO: A man wearing a protective mask walks past an office building with IBM logo amidst the
FILE PHOTO: A man wearing a protective mask walks past an office building with the IBM logo amidst the easing of the coronavirus disease (COVID-19) restrictions in the Central Business District of Sydney, Australia, June 3, 2020. REUTERS/Loren Elliott

REUTERS: International Business Machines Corp edged past Wall Street estimates for quarterly revenue on Monday, bolstered by higher demand for its cloud services, a business it is staking its future on as it prepares to spin off one of its legacy units.

IBM shares, however, fell 3per cent after the company stayed away from issuing a forecast for the current quarter, citing uncertainty around a global economic recovery due to the COVID-19 pandemic.

"Clients' near-term priorities continue to include operational stability, flexibility and cash preservation, which tends to favor (operating expenses) over (capital expenses)," Chief Financial Officer James Kavanaugh said.

"This is resulting in some project delays and purchase deferrals."

Revenue from the cloud business, previously headed by Chief Executive Officer Arvind Krishna, rose 19per cent to US$6 billion in the third quarter, offsetting weakness in much of its other businesses.

The boost from the cloud business further underscores IBM's move to focus on its high-margin open hybrid cloud and AI solutions, which together account for more than half of its recurring revenue, by spinning off its IT infrastructure services unit.

"Clients continue to balance short-term challenges and opportunities for transformation ... More of my conversations with CEOs are around how they become digital businesses," Krishna said on a post-earnings call.

IBM's total revenue fell 2.6per cent to US$17.56 billion in the reported quarter, but was slightly above analysts' estimates of US$17.54 billion, according to IBES data from Refinitiv.

Excluding the impact from currency and business divestitures, sales declined 3.1per cent.

The global technology services segment, IBM's biggest unit that caters to some of the world's largest data centers, reported a 4per cent drop in revenue to US$6.5 billion.

Excluding items, the company earned US$2.58 per share, which was in line with analysts' estimates.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Anil D'Silva)

Source: Reuters

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