Editor’s note: Cassandra Mooshian is senior analyst with Technology Business Research.
HAMPTON, N.H. – During IBM’s 3Q18 earnings call Tuesday, the company reported quarterly revenue of $18.8 billion, down 2.1% from the year-ago quarter after three consecutive quarters of midsingle-digit growth. Despite the temporary uptick in prior quarters, the overall outlook for IBM remains dreary as the z14 mainframe-related upticks normalize and start to wear off and IBM struggles to maintain “as a Service” growth on par with industry front-runners.
IBM continues to cite cloud as a bright spot in quarterly performance, with 3Q18 revenue of $4.6 billion, up 12% from the year-ago quarter. Within the cloud business, IBM reported an “as a Service” run rate of $11.4 billion, which grew 22% from 3Q17.
In comparison to the latest results of Amazon Web Services (AWS), however, in CY2Q18, AWS’ “as a Service” revenue of $11.8 billion grew 49% year-to-year, while IBM’s revenue of $2.8 billion grew 26%.
Losing share in a high-growth market does little to instill investor confidence.
Inside IBM: Stalled services revenue shows tech giant’s work is far from done
Foundational cloud revenue, which includes both services and cloud hardware and software building blocks, was down 1.4% over the same compare amid the continued shift to automation and pay-as-you-go options.
Looking ahead, we expect continued declines in foundational cloud revenue in coming quarters as IBM rounds out on a full year of z14 being generally available.
Despite IBM’s earnings woes, Services gross margins improved, indicating greater service delivery efficiency to help combat legacy ITO erosion. Additionally, as the z14 refresh cycle matures, Power 9 refreshes are on the upswing, helping to offset slowing growth in Z Systems.
[IBM employs several thousand people across North Carolina and operates one of its largest campuses in Research Triangle Park.]
(C) TBR
IBM’s mixed financials: Revenue misses but earnings top Street
