RESEARCH TRIANGLE PARK – Shares in tech giant IBM (NYSE: IBM) tumbled 4.4 percent in after-hours trading Thursday despite an earnings report that topped expectations. Shares later rallied to cut losses to 3 percent.

According to CNBC and Reuters, IBM did end a 22-straight quarter streak of year-over-year revenue declines. But Technology Business Research noted that IBM’s services groups, for example, are still struggling to produce growth.

IBM, which had been expected to report positive news as a turnaround effort by Chair and CEO Ginni Rometty takes hold, reported revenues of $22.54 billion, topping expectations from Thomson Reuters of $22.06 billion.

Earnings came in at $5.18 per share vs. estimates of $5.17 per share.

Shares, however, fell more than $7 to $161.80 within less than a hour of the earnings report.

IBM forecast a profit of $1380. per share for 2018 – the same as 2017 and below analysts’ expectations of $13.92, according to Thomson Reuters.

“According to Street expectations, we’re already very low for earnings, … but still, you would have liked to have seen, with the little better revenue trajectory and some positive comments, that would have played in to a nicer number,” Pivotal Research analyst Lou Miscioscia told Reuters.

Rometty’s view

“Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter,” Rometty said in a statement. “During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business. Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses.”

Revenue breakdown

IBM reported revenues by segment as follows:

  • Cognitive Solutions (includes solutions software and transaction processing software) — revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.
  •  Global Business Services ( includes consulting, global process services and application management) — revenues of $4.2 billion, up 1 percent (down 2 percent adjusting for currency).  Strategic imperatives revenue grew 9 percent led by the cloud practice, mobile and analytics.
  •   Technology Services & Cloud Platforms includes infrastructure services, technical support services and integration software) — revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency).  Strategic imperatives revenue grew 15 percent, driven by hybrid cloud services, security and mobile.
  • Systems ( includes systems hardware and operating systems software) — revenues of $3.3 billion, up 32 percent (up 28 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.
  •   Global Financing (includes financing and used equipment sales) — revenues of $450 million, up 1 percent (down 2 percent adjusting for currency).

Stock upgrade

On Wednesday, IBM stock received a double upgrade from analyst firm Barclays to “overweight” from “underweight.”

“IBM could emerge as the next important cloud vendor after Amazon and Azure over time,” analyst Mark Moskowitz wrote.

He also raised his price target on IBM shares to $192 from $133.

“There is room for another cloud player,” Moskowitz said in a research note titled “IBM – A New Dawn Emerges.””We think that IBM could emerge as the next important cloud vendor after Amazon and Azure over time as customers seek a multi-cloud strategy to avoid vendor lock-in or technology complacency,”  Moskowitz added. “As a result, IBM’s strategic revenue should surpass legacy revenue – implying the worst may be over.”

IBM employs several thousand people across North Carolina and operates one of its largest campuses in RTP.