Tech giant IBM reported mixed Q2 results in a quarter when the coronavirus pandemic was at its peak, with revenue standing at $18.12bn – down 5.4% year-on-year.
It is the second consecutive quarter of revenue decline for IBM. However, revenue was higher than analyst expectations of $17.72bn, causing IBM’s share price to rise 6% in extended trading.
IBM’s net income for the period ended 30 June was down 46%, coming in at $1.36bn. Adjusted earnings per share were $2.18, beating analyst expectations of $2.07 per share.
The firm’s strongest results were in cloud computing, with revenue up 30% at a total of $6.3bn.
“Our clients see the value of IBM’s hybrid cloud platform, based on open technologies, at a time of unprecedented business disruption,” said IBM chief Arvind Krishna, who replaced Ginni Rometty in April.
“We are committed to building, with a growing ecosystem of partners, an enduring hybrid cloud platform that will serve as a powerful catalyst for innovation for our clients and the world.”
IBM Q2 results: “The company is running steadily”
IBM subsidiary Red Hat, which provides open source enterprise software products, also reported strong results with revenue up 17%.
“The long and short of it, is that the company is running steadily – and in some business units doing very well – despite the challenging business environment because of the pandemic,” said Bola Rotibi, research director, software development at market intelligence firm CCS Insight.
“IBM reported solid earnings and sales growth above expectations, but admittedly expectations were low coming into the quarter,” said Logan Purk, senior analyst at financial services firm Edward Jones.
Like most firms, the pandemic has weighed heavily on IBM and the firm did not update its full-year guidance, citing coronavirus uncertainty.
“As the pandemic intensified and the macroeconomic climate worsened, clients quickly shifted their focus to operational stability and cash preservation,” said Jim Kavanaugh, IBM’s chief financial officer.
“This resulted in a delay in both the existing projects and new commitments especially in projects that are more discretionary or with longer time to value.”
IBM has the added cushion of more than half of its revenues coming from recurring contracts.
“Covid-19 had a mixed impact by driving greater demand for digital transformation projects, but also slowing sales closings as customers were reluctant to invest in new IT projects,” added Purk.
“While cloud and digital transformation are clear tailwinds, the focus continues to be the revamp of the legacy consulting and IT businesses.”
IBM’s share price is down 6% year-to-date.