IBM reports 3% growth in Q2 revenue, earnings beat expectations

Big Blue reported revenue of $18.7 billion, up 3% year-over-year.
Written by Natalie Gagliordi, Contributor

IBM published better-than-expected second-quarter financial results on Monday, posting its second consecutive quarter of sales growth and showing steady gains in cloud. The business technology giant delivered non-GAAP EPS of $2.33 on revenue of $18.7 billion, up 3% year-over-year. Analysts were expecting earnings of $2.29 per share on revenue of $18.3 billion.

IBM said total cloud revenue was $7 billion for the quarter, up 13%.  

Broken down further, IBM said cloud and cognitive software revenue -- which includes Red Hat as well as Cognitive Applications and Transaction Processing Platforms -- was up 6% to $6.1 billion. IBM said adoption of its Cloud Pak lineup boosted growth. Cognitive applications were led by security and AI applications. Transaction processing platform revenue fell 7% and cloud revenue was up 29% in the second quarter.

Meanwhile, systems revenue fell 7.3% to $1.7 billion driven by declines in the IBM Z, IBM's smaller footprint mainframe that utilizes design thinking. Storage systems revenue fell over 7% this quarter. 

Global Technology services, or GTS, posted $6.3 billion in revenue. Global Business Services revenue (which includes Consulting, Application Management and Global Process Services) was  $4.3 billion, up over 11%. 

Red Hat revenue was up 17%.

"As I look back on our first half results, our revenue performance improved in the first quarter and then again in the second and our adjusted free cash flow grew in the first half," said James Kavanaugh, IBM SVP and chief financial officer. "Our business model fundamentals are solid. Operating margins are improving, and we're driving profit dollar growth. Importantly, as you've heard today, we've been taking a number of actions to execute our hybrid cloud and AI strategy. This includes strengthening our portfolio, expanding our ecosystem and implementing go-to-market changes. And we continue to have a strong balance sheet and liquidity position."  

As for the outlook, Wall Street is looking for IBM to report third-quarter non-GAAP earnings of $2.59 per share on revenue of $17.64 billion.

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