(Bloomberg) – International Business Machines Corp. beat analyst estimates for second-quarter revenue, with cloud sales helping to offset the coronavirus-driven dips in the consulting services business. Shares earned in late trading.
Cloud revenue increased 30% to $ 6.3 billion in the period ended June 30, the Armonk, New York-based company said in a statement. That helped offset declining revenues at the Global Business Services and Global Technology Services technical support units, which represent approximately 56% of IBM’s total revenues. Overall, sales fell 5.4% to $ 18.1 billion, beating the $ 17.62 billion that analysts had expected, according to data compiled by Bloomberg.
Covid-19 has hit hard on IBM’s services business, with many of its customers delaying purchases of information technology or software updates to focus on short-term stability and preserving cash to survive the pandemic. Other software manufacturers have reported similar declines in sales. But CEO Arvind Krishna, who posted earnings after his first full quarter in office, said customers are seeing value in IBM’s cloud offering “at a time of unprecedented business disruption.”
IBM shares rose about 4.5% in extended trading after closing at $ 126.37. They had decreased 5.7% so far this year. Earnings, excluding some costs, fell 31% to $ 2.18 per share, beating analysts’ average estimate of $ 2.12.
Krishna, who took over Ginni Rometty in April, is guiding the company through a global crisis and at the same time spearheading IBM’s third major transformation in its 109-year history. IBM has cut thousands of jobs in recent months as it reshapes the business. The coronavirus pandemic prompted Krishna to withdraw the company’s full-year earnings outlook in April, and IBM did not provide a new forecast on Monday.
“When we look at it by geography, by continent or by industry, there is too much variability” to be able to provide guidance, Krishna said in a conference call. “In April, when we said we would re-evaluate in 90 days, we were perhaps a little optimistic that we would gain more stability” in the path of the virus and its impact on economic conditions, he added.
IBM is dangling its future in cloud computing, aiming to become the leader in hybrid cloud software and services, which enables customers to store data on private servers and on multiple public clouds, including those managed by its rivals. Amazon.com Inc. and Microsoft Corp. In 2018, IBM spent $ 34 billion to buy open source software provider Red Hat to assist in that transition.
IBM reported that Red Hat contributed $ 867 million in the quarter, adjusted by deferred revenue accounting rules.
(Updates with CEO comments on guidance in the sixth paragraph. An earlier version of this story corrected Red Hat’s revenue contribution amount.)
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