(Reuters) – International Business Machines Corp (IBM.N) topped second-quarter profit estimates on Monday, noting that demand for their cloud computing business would increase as large corporations accelerate their digital change due to the coronavirus crisis.
FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS / Sergio Perez / File Photo
The company’s shares increased 5% in after-hours operations.
IBM has scrapped part of its legacy business to focus on the high-margin cloud computing business, an area that has seen a lot of action in recent years as companies scale up their digital shift to increase efficiency.
“The trend that we see in the market is clear. Customers want to modernize applications, move more workloads to the cloud, and automate IT tasks, “new IBM chief Arvind Krishna said in a post-earnings call with analysts.
Revenue from the cloud business, previously led by Krishna, increased 30% to $ 6.3 billion in the second quarter.
Krishna took over as CEO of Ginni Rometty in April, while appointing the former Bank of America Corp (BAC.N) Chief Technology Officer Howard Boville as the new head of the cloud business.
IBM’s global business services unit was hurt when clients reduced or delayed spending on discretionary projects due to COVID-19, chief financial officer James Kavanaugh told Reuters. Sales at the unit fell 7% to $ 3.9 billion.
While Western Europe and Asia Pacific showed an uptick in customer spending during June, customers in the United States and Latin America withdrew as the pandemic’s impact worsened, Kavanaugh said.
“From a customer perspective, our business is more concentrated in large companies, which in total have been relatively more stable during the pandemic,” said Kavanaugh.
IBM’s total revenue fell 5.4% to $ 18.12 billion, but exceeded analyst estimates of $ 17.72 billion, according to IBES data from Refinitiv. Excluding the impact of the sale of foreign exchange and businesses, revenues decreased 1.9%.
Excluding items, the company earned $ 2.18 per share, above estimates of $ 2.07.
Munsif Vengattil Report in Bangalore; Edited by Maju Samuel
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