IBM said its revenue fell 1 percent to $19.2 billion in the third quarter of 2017 despite investments in new business areas.
The drop is the company’s 22nd consecutive quarter of year-over-year revenue decline.
The highlight of the IBM’s earnings report is the 10 percent growth in IBM’s revenue from strategic imperatives to $8.8 billion in Q3.
IBM said its revenue from strategic imperatives was $34.9 billion (+10 percent) over the trailing 12 months, representing 45 percent of IBM revenue.
IBM generated Cloud revenue of $15.8 billion (+25 percent) over the trailing 12 months.
IBM’ as-a-service annual exit run rate of $9.4 billion in the quarter registered 25 percent year to year growth.
Ginni Rometty, IBM chairman, president and chief executive officer, said: “We achieved double-digit growth in strategic imperatives, extended cloud leadership, and expanded cognitive solutions business.”
IBM segment results
IBM generated revenues of $4.4 billion (+4 percent) from Cognitive Solutions including solutions software and transaction processing software, driven by solutions software, including security and analytics, and transaction processing software.
IBM created revenue of $4.1 billion (–2 percent) from Global Business Services including consulting, global process services and application management.
IBM generated revenue of $8.5 billion (–3 percent) from Technology Services & Cloud Platforms including infrastructure services, technical support services and integration software.
IBM’s revenue from Systems including systems hardware and operating systems software rose 10 percent to $1.7 billion.
Strategic Imperatives Revenue
IBM cloud revenues increased 20 percent to $4.1 billion. Cloud revenue over the last 12 months was $15.8 billion, including $8.8 billion delivered as-a-service and $7.0 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions.
TBR in a research note said that IBM continues to face competitive pressure from lower-cost peers angling to use commoditized IT services as on-ramps to future digital engagements, and these players are making similar investments in digital expertise and IP to support clients’ transformation initiatives.
“IBM will need to accelerate its efforts to unify its services go-to-market strategy or its window of opportunity to lead the digital transformation market may close before the company can recoup its heavy investments,” said Jennifer Hamel of TBR.
“Cloud is a bright spot for IBM, with total cloud revenue growth reportedly over 20 percent 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 percent from 3Q16,” Cassandra Mooshian of TBR.
Stephanie Long of TBR said IBM has shifted focus to align with the disruptive impacts of digital technologies on its core legacy business, as customers demand emerging capabilities that fuse new technologies, such as artificial intelligence (AI), with existing capabilities.
Recently, IBM counteracted the commoditization of its legacy businesses by focusing on higher-margin software and services, without sacrificing its commitment to proprietary servers, all while investing in bleeding edge capabilities such as quantum computing. While IBM’s investment strategy is well targeted at key technologies, its success is not yet determinable.