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IBM Revenue Beats Estimates on Boost From Cloud Demand

The CEO said his clients were seeing value in IBM’s cloud offering “at a time of unprecedented business disruption.”

Olivia Carville (Bloomberg) -- International Business Machines Corp. beat analysts’ estimates for second-quarter revenue, with cloud sales helping offset coronavirus-fueled declines in the consulting services business. The shares gained in late trading.

Cloud revenue increased 30% to $6.3 billion in the period ended June 30, the Armonk, New York-based company said Monday in a statement. That helped offset revenue declines in the tech support units Global Business Services and Global Technology Services, which account for about 56% of IBM’s total revenue. Overall, sales fell 5.4% to $18.1 billion, beating the $17.62 billion analysts had expected, according to data compiled by Bloomberg.

Covid-19 has hit IBM’s services business hard as many of its clients delayed purchases of information technology or software upgrades to focus on short-term stability and cash preservation to survive the pandemic. Other software makers have reported similar dips in sales. But Chief Executive Officer Arvind Krishna, who presented earnings after his first full quarter in the role, said clients are seeing value in IBM’s cloud offering “at a time of unprecedented business disruption.”

IBM shares rose about 4.5% in extended trading after closing at $126.37. They had declined 5.7% so far this year. Earnings excluding some costs fell 31%, to $2.18 a share, coming in above the average analyst estimate of $2.12.

Krishna, who took over from Ginni Rometty in April, is steering the company through a global crisis while also spearheading IBM’s third major transformation in its 109-year history. IBM has cut thousands of jobs in recent months as it reshapes the business. The coronavirus pandemic led Krishna to withdraw the company’s full-year earnings outlook in April, and IBM didn’t provide a new forecast on Monday.

“When we look at it by geography, by continent or by industry, there is just too much variability,” to be able to provide guidance, Krishna said on a conference call. “In April when we said we would re-evaluate in 90 days, maybe we were a little bit optimistic that we would get more stability” on the trajectory of the virus and its impact on economic conditions, he added.

IBM is hanging its future on cloud computing, aiming to become the leader in hybrid-cloud software and services, which let clients store data in private servers and in multiple public clouds, including those run by rivals Inc. and Microsoft Corp. In 2018, IBM spent $34 billion to buy open source software provider Red Hat to aid that transition.

IBM reported Red Hat contributed $867 million in the quarter, adjusted for deferred revenue accounting rules.

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