M&E Daily

IBM CFO: Company Made Cloud Services Strides in Q2

IBM continued to make strides in the second quarter (ended June 30) with its cloud services, including an increased number of clients opting to use its blockchain and Watson artificial intelligence (AI) solutions, according to CFO Martin Schroeter.

“The quarter played out as we expected, with continued solid growth in our strategic imperatives” business areas, he told analysts on an earnings call July 18. In addition to cloud services, IBM’s growing strategic imperative businesses include analytics, mobile and security initiatives.

Separately, the company said July 19 that four new IBM Cloud data centers are now open, including two in London, England; one in San Jose, California; and one in Sydney, Australia. The four new facilities boosted IBM’s global cloud data center footprint to almost 60 across 19 countries and “bolster its existing cloud footprint” in those regions, it said in a news release.  

During the second quarter, total strategic imperative revenue grew 7% in constant currency (eliminating the effects of fluctuating exchange rates), Schroeter said on the call.

Over the past 12 months, revenue from IBM’s strategic imperatives increased 12% to more than $34 billion, and now represents 43% of total revenue, he said. In IBM’s Global Business Services business, strategic imperative revenue grew 8%, “led by” cloud and mobile, it said in an earnings news release. In its Technology Services & Cloud Platforms business, strategic imperative revenue jumped 20%, “driven by hybrid cloud services,” it said.

Second-quarter cloud revenue increased 15% from a year ago to $3.9 billion and was up 17% adjusting for currency, IBM said. Cloud revenue totaled $15.1 billion over the last 12 months. Revenue from analytics, meanwhile, increased 4% (up 6% adjusting for currency), mobile revenue grew 27% (up 29% adjusting for currency) and security revenue increased 4% (up 5% adjusting for currency) in the second quarter, the company said.

But IBM shares were down 3.73% at $148.26 in early afternoon trading July 19, likely due to the weaker performance of its non-strategic imperative businesses. Total IBM revenue slipped to $19.3 billion from $20.2 billion a year ago, while profit dipped to $2.3 billion from $2.5 billion.

“We continue to add state-of-the-art tools and technologies to exploit enterprise data in the cloud,” including Watson and IBM Blockchain, Schroeter told analysts on the call. “You see this last point play out as companies deploy IBM Blockchain and Watson solutions in the cloud,” he said, pointing to IBM’s recent agreement with a consortium of seven of Europe’s top banks to create a new blockchain service for trade finance for the small and medium business market.

“Similarly, in the second quarter, we saw Watson deployments continue to expand globally,” he said, adding: “The cognitive opportunity is a global one. It’s not centered in New York, or Boston, or Silicon Valley, so you can’t just look and listen in those places. In healthcare alone you’d miss this quarter that the first healthcare provider in Latin America is deploying Watson for Oncology, and Baheal Pharmaceutical Group is bringing Watson for Genomics to clinicians across China.” Eighty percent of the hospitals that have adopted Watson for Oncology are outside the U.S., he noted.

Schroeter went on to stress that the Watson client wins were not just in healthcare. “We have Watson deployed with other leaders like Bradesco, Honda and Vodafone as well,” he said.