Editor’s note: Cassadra Mooshian is a Senior Analyst with Technology Business Research.
HAMPTON, N.H. – During IBM’s (NYSE: IBM) 1Q18 earnings call, the company reported quarterly revenue of $19.1 billion, up 5.1% from the year-ago quarter. This marks the second consecutive quarter of growth after a streak of 22 consecutive quarters of year-over-year decline, indicating that the company may finally be bouncing back from its downward spiral with its smaller revenue base after such declines and portfolio and talent investments. [However, shares did decline in after-hours trading as IBM guidance on future earnings disappointed.]
[In a video analysis linked above with this post, Bloomberg Intelligence’s Anurag Rana discusses IBM’s first-quarter results on “Bloomberg Technology.” Ranna is concerned about gross margins.]
Cloud is a particularly bright spot for IBM, with total cloud revenue growth reportedly over 20% over the same compare, reaching $4.2 billion. Within the cloud business, IBM reported an as a service run rate of $10.7 billion, which grew 24.4% from 1Q17. Foundational cloud revenue, which includes both services and cloud hardware and software building blocks, was up 11.4% over the same compare amid a seasonally weak first quarter and the continued shift to automation and pay-as-you-go options.
IBM’s software revenue of $5.7 billion was up 5.5% from 1Q17, driven by continued growth in cloud- and analytics-based solutions, particularly the Watson, security and middleware portfolios. The company reported growth across all four software segments (Solutions Software, Transaction Processing Software, Integration Software and Operating Systems Software) for the first time since before the company reclassified its financials in this way (1Q14). Security software is a noteworthy growth driver, particularly as customers look to comply with GDPR regulations in Europe, benefitting the Cognitive Solutions segment. Additionally, boosting security solutions with AI capabilities and features has reportedly helped drive demand for IBM’s security software solutions
IBM’s Watson industry teams, particularly Watson Financial Services, continue to generate strong growth as IBM combines its software and services with acquired assets from Promontory Financial Group to digitally transform IT environments for financial services customers. By growing the software and cloud mix within these and other large services engagements, IBM is equipped to withstand some of the business model shifts as a result of the growing mix of cloud within its portfolio, as evidenced by top line growth for the company this quarter.
(C) TBR
