IBM’s share price has risen by almost 6% in afterhours trading after the company announced its second quarter results yesterday evening. While sales were down 5.4% to $18.1 billion, the drop in revenues was less severe than Wall Street analysts had predicted. There were also encouraging signs that the Covid-19 pandemic is helping accelerate the transition of IBM clients towards high-margin cloud hosting services.
IBM has been moving away from its traditional hardware products towards virtual hosting and infrastructure in a cloud environment. More of its large enterprise-level clients moving towards increased adoption of cloud services during the ongoing pandemic helped boost revenues by almost $500 million above the $17.7 billion that analysts were predicting.
Revenues from cloud hosting grew 30% over the quarter to the end of June, to come in at $6.3 billion. James Kavanaugh, the IT company’s chief financial officer, commented:
“As we got into the latter half of the second quarter, we saw a marked inflection in clients’ acceleration to digital transformation . . . You saw that play out in our cloud performance, which was up very nicely.”
There were, however, also some negatives to report. IBM’s revenue from applications development and consulting dropped drastically as clients opted to cut or delay discretionary spending.
Arguably the oldest IT company in the world, IBM was founded in 1911. Over the first several decades of its business activity, International Business Machines, built automated solutions for routine business processes and transactions. It was one of the first companies to build data tabulating machines and time clocks based that recorded the information provided by punched cards.
Since the 1970s and 1980s, IBM has been one of the world’s largest computer and hardware companies. From its New York headquarters, operations in 170 different countries are supported. IBM currently has a market capitalisation of around $112 billion.
Over the years, the company has proven itself to be a master at adapting to changing trends in technology. Its latest transformation is taking it away from hardware such as personal computers and physical servers towards a greater focus on software, artificial intelligence and, crucially, cloud computing services. Arvind Krishna, IBM’s new chief executive, having taken over the role in April, previously ran the company’s cloud division. His promotion is an indication of the strategic shift being pursued.