US tech company IBM said in its second quarter report published on Wednesday that it beat analysts’ expectation on the back of higher revenue growth in businesses like cloud computing and cybersecurity, which also includes blockchain technology.
CEO Ginni Rometty redirected IBM’s priorities from its traditional business of distributing hardware and software to innovative technologies like artificial intelligence (AI), blockchain, and cloud computing. The new businesses are referred to as “strategic imperatives.” Currently IBM is one of the most active blockchain adopters. The company is involved in over 60 blockchain network projects.
In the second quarter, revenue from the “strategic imperatives” rose 15% to $10.1 billion, which accounts for more than 50% of IBM’s total revenue. The company’s CFO James Kavanaugh noted that IBM’s shift to newer technologies had been paying off. He told Reuters:
“We accelerated our growth, really capitalizing on these emerging high value areas.”
In annual terms, “strategic imperatives” increased by 15% to $39 billion, compared to $34.1 billion recorded in the same period last year.
Total revenue for the quarter rose about 4% to $20 billion, better than the $19.85 billion anticipated by Reuters analysts. Thus, IBM’s revenue has increased for the third straight quarter after being in the red for about six years.
The quarterly operating gross profit margin fell to 46.5% from 47.1%.
CFRA Research analyst David Holt noted:
“One of the key components was as-a-service growth ... and as that scales through, you’re starting to see margin expansion shine. Gross margin closed the gap.”
In the second quarter, which ended June 30, net income increased to $2.4 billion, or $2.61 per share, from $2.33 billion, or $2.48 per share the previous year.
On the New York Stock Exchange (NYSE), the IBM share price added 0.7% for the day. However, since the beginning of the year, the share price has lost about 6%.
Kavanaugh revealed that the business has been growing overall. Over the last quarter, IBM signed 13 deals at over $100 million each.
CEO Ginni Rometty said:
“More clients are engaging IBM on their journey to the cloud, and deploying IBM Cloud, Watson AI, analytics, blockchain and security solutions. This demonstrates IBM's unique leadership in providing innovative technology coupled with deep industry expertise, trust and security.”