RESEARCH TRIANGLE PARK – Shares of IBM (NYSE: IBM) rose some 5% in after-hours trading Wednesday thanks to a quarterly report that beat Wall Street analysts’ expectations and a forecast of more growth ahead. Playing a key role in that is Raleigh-based Red Hat and its cloud technology.

So said Chair and CEO Arvind Krishna.

“The results we delivered in the third quarter reflect our continued focus on the execution of our strategy with over $14 billion of revenue and strong growth across the portfolio,” Krishna said in a conference call. “Technology remains a fundamental source of competitive advantage, and we continue to see solid demand for our hybrid cloud and AI solutions. Continued double-digit revenue growth in IBM Consulting, capturing client demand for digital transformations.”
Moments later he highlighted Red Hat and IBM’s cloud strategy.

IBM CEO Arvind Krishna. (Photo by John O’Boyle)

“Our point of view is clear. Hybrid cloud and AI are the two most transformational enterprise technologies of our time,” he explained, according to a transcript of the call provided by Motely Fool.“Hybrid cloud is already becoming the dominant architecture for enterprise. According to a recent survey by the Harris Poll, 77% of businesses surveyed that they have adopted hybrid cloud for their organizations with data located across multiple clouds, on-premise, or at the edge. Hybrid cloud is about offering clients a platform that can drive value across these different environments. Our platform based on Red Hat allows our clients to consume software driven by open-source innovation.”

But Red Hat is changing. Just two weeks ago IBM said undisclosed number of Red Hat employees will move to IBM as part of a consolidation  uniting the tech giant’s data storage offerings under one name. The move reflects the importance IBM places on cloud computing – and why it acquired Red Hat for $34 billion in the first place three years ago.

CFO Jim Kavanaugh was especially bullish on Red Hat as a key contributor to IBM’s growth in cloud revenue.

“Red Hat revenue all-in grew 18%,” he noted.

“As a leader in open-source technologies for the enterprise, Red Hat’s performance was again fueled by market share gains across RHEL [Red Hat Enterprise Linux], OpenShift, and Ansible this quarter. With our enterprise incumbency and global scale, we continue to see an increase in large deals, as well as strong cross-sell and upsell across Red Hat solutions. Automation revenue grew 3%. This quarter’s performance reflects continued adoption in areas like AIOps and management and integration, while we’re also wrapping a strong acquisition content from last year.”

More IBM, Red Hat headlines

Hatter assimilation: Some Red Hat employees will switch to IBM in consolidation