Editor’s note: IBM’s revenue dropped for the 22nd consecutive quarter, year over year, but emerging officers such as subscriptions for services offer signs of hope for a return to growth, says Technology Business Research Analyst Cassandra Mooshian.
HAMPTON, N.H. – During IBM’s (NYSE: IBM) 3Q17 earnings call Tuesday, the company reported quarterly revenue of $19.2 billion, down just 0.4% from the year-ago quarter, the company’s 22nd consecutive quarter of year-over-year top line decline.
Cloud is a bright spot for IBM, with total cloud revenue growth reportedly over 20% over the same compare, reaching $4.1 billion. Within the cloud business, IBM reported an as a Service run rate of $9.4 billion, which grew 25% from 3Q16.
TBR expects IBM’s cloud revenue to grow by double-digits once again in 4Q17 as the company benefits from seasonality, investments in the as a Service portfolios as well as the roll-out of z14.
IBM’s software revenue of $5.8 billion returned to slight growth, up 2.1% from 3Q16, driven by continued growth in its cloud-based solutions, particularly the Watson analytics portfolio and security.
Among the software segments, IBM reported declines in both Integration Software and Operating Systems Software while reporting growth in both of its Cognitive Solutions segments, Solutions Software and Transaction Processing Software. IBM expects security and customer engagement to be pockets of continued growth for IBM Software in the fourth quarter.
We expect IBM’s Watson industry teams to each generate double-digit growth in coming quarters as IBM combines software and services to digitally transform IT environments for customers in the financial services and healthcare sectors.
By growing the software and cloud mix within these engagements, IBM is able to withstand some of the business model shifts as a result of the growing mix of cloud within its portfolio and help boost margins.
(C) TBR
