IBM posts mixed Q1 results but stresses cloud sales

All of IBM's business segments were down or flat year-over-year, but its cloud revenues are growing, the company argued

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IBM published its first quarter financial report on Tuesday, posting mixed results with every business segment down or flat year-over-year. Shares were down in after-hours trading.  

However, IBM focused on the performance of its cloud business. The company has posted $19.5 billion in cloud sales over the last 12 months, up 10 percent year-over-year, it said. IBM's as-a-service annual exit run rate for cloud revenue now stands at $11.7 billion, up 10 percent year-over-year.

The company's non-GAAP earnings per share (EPS) came to $2.25 over revenue of $18.2 billion.

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Wall Street was expecting earnings of $2.22 per share on revenue of $18.51 billion. Shares were down slightly in after-hours trading.

"In the first quarter, our cloud revenue growth accelerated, and we again grew in key, high-value areas in Cloud and Cognitive Software and in consulting," CEO Ginni Rometty said in a statement. "IBM's investments in innovative technologies coupled with our industry expertise and our commitment to trust and security position us well to help clients move to chapter two of their digital reinvention."

In a conference call, CFO James Kavanaugh  noted that IBM recently adjusted its segments structure so that it "better aligned our portfolio to the market and to underlying business models."

"As our clients become digital enterprises, they need tighter integration between hybrid cloud and their data and AI platforms to unlock value," he said. "And so we recently made changes to our management system to more effectively address our clients' evolving needs and in preparation for the acquisition of RedHat."

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IBM's Cloud & Cognitive Software segment -- which includes cloud and data platforms, cognitive applications and transaction processing platforms -- brought in revenues of $5 billion, down 2 percent. Within that category, cognitive applications revenue was up 2 percent, while cloud and data platforms revenue was down 2 percent.

The Global Business Services segment -- including consulting, application management and global process services -- earned $4.1 billion in revenue, flat year to year.

Global Technology Services -- including infrastructure and cloud services and technology support services -- brought in revenues of $6.9 billion, down 7 percent. However, the segment did see growth in hybrid cloud revenue.

The Systems segment -- including systems hardware and operating systems software -- achieved revenues of $1.3 billion, down 11 percent. The decline was largely due to the impact of the IBM Z product cycle dynamics and weakness in Storage.

The Global Financing segment -- which includes financing and used equipment sales -- brought in revenues of $406 million, flat year-to-year.

Kavanaugh highlighted how IBM has invested in adding capabilities across areas including IBM Cloud, IBM Cloud Private and IBM Cloud Private for data; the IBM Multicloud Manager; cloud grudges; cloud migration services; and cloud optimized systems.

"Over the last several months, we've talked about the next chapter of cloud, which focuses on shifting mission-critical work to the cloud and optimizing everything from supply chains to core banking systems," he said. "To address this opportunity, enterprises need to be able to move and manage data, services and workflows across multiple clouds and on-prem. And they need to be able to address security concerns, data protection and protocols, availability and the cloud management. This requires a hybrid, multi-cloud open approach." 

For the full 2019 fiscal year, IBM expects non-GAAP earnings of at least $13.90 per share.