HAMPTON, N.H. – During IBM’s (NYSE: IBM) 2Q18 earnings call on Wednesday, the company reported quarterly revenue of $20 billion, up 3.7 % from the year-ago quarter, marking the third consecutive quarter of midsingle-digit growth.

After a streak of 22 consecutive quarters of year-over-year decline through 4Q17, growth indicates that 2018 could be the year IBM begins to recover from its downward trajectory with the help of its smaller revenue base and a portfolio more in line with enterprise demands.

Cloud is a bright spot for IBM, with total cloud revenue growth reportedly more than 20% over the same compare, reaching $4.7 billion. Within the cloud business, IBM reported an “as a Service” run rate of $11.1 billion, which grew 26% from 2Q17. Foundational cloud revenue, which includes both services and cloud hardware and software building blocks, was up 13% over the same compare amid the continued shift to automation and pay-as-you-go options.

Software, however, is a quite different story, underscoring how strong cloud growth and the continued scaling of the cloud “as a Service” business are not quite enough to materially offset continued legacy software declines. IBM’s software revenue of $6.1 billion grew just shy of 1% from 2Q17, boosted by continued growth in cloud- and analytics-based solutions, but pressured by lackluster demand for transaction processing software. Integration Software showed the strongest growth at 3% as the company pushes IBM Cloud Private to market, gaining 100 new customers this quarter.

IBM’s Watson artificial intelligence industry teams, Watson Financial Services in particular, continue to grow at high rates as IBM combines its software and services with acquired assets from Promontory Financial Group to digitally transform IT environments for financial services customers. In May the company announced its acquisition of Armanta to further fuel its Watson Financial Services capabilities. By growing the analytics and cloud mix within an increasing number of customer engagements, IBM is equipped to withstand some of the business model shifts it has been facing.

(C) TBRI