IBM beats Q2 expectations with continued cloud growth

The company touted double-digit revenue growth in 'strategic imperatives' like cloud and analytics, though revenues are down compared to Q2 2015.
Written by Stephanie Condon, Senior Writer

IBM reported stronger-than-expected second quarter earnings Monday, touting double-digit revenue growth in "strategic imperatives" like cloud, analytics, and engagement.

The company reported second quarter net income of $2.8 billion. Non-GAAP earnings were $2.95 a share on revenue of $20.2 billion. Wall Street was expecting non-GAAP earnings of $2.89 a share on revenue of $20.03 billion.

While IBM beat market expectations, its revenue was down from a year ago, when it posted $20.8 billion. This makes the second quarter of 2016 IBM's 17th-straight declining quarter. Breaking its business down into segments, IBM's systems business saw a dramatic decline in revenue. The segment, which includes hardware and operating systems software, was down 23.2 percent in the second quarter, bringing in revenues of $2 billion.


Executives stayed upbeat, noting that strategic imperatives now account for 38 percent of its revenue. Noting the strategic imperatives goalposts met in the second quarter, IBM CFO Martin Schroeter said on a conference call, "We got done what we set out to do."

Second quarter revenues from strategic imperatives increased 12 percent year-to-year, IBM reported. Cloud revenue grew 30 percent in second quarter, reaching $11.6 billion for the last 12 months. Revenues from analytics increased 5 percent, while revenues from mobile increased 43 percent, and revenues from security increased 18 percent.


So far in 2016, IBM has closed as many as 11 acquisitions, including the Weather Company and video cloud services firm Ustream. It's also invested nearly $2 billion capital expenditures. "IBM is pioneering new business opportunities beyond the traditional IT marketplace," IBM chairman and CEO Ginni Rometty said in a statement.

IBM plans to enable Watson for more security applications, the company reported Monday, following its acquisition of Resilient Systems. The company is also venturing into new areas of investment, like quantum computing and Blockchain solutions.

IBM's earnings outlook for the full year remained unchanged from the previous quarter, at $13.50 a share, in spite of the fact that the company beat market expectations two quarters in a row.

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