Double-digit cloud revenue growth fuels IBM's Q3 earnings results

IBM
IBM's cloud division posts double-digit revenue growth in the third quarter. (Pixabay)

As further validation to split IBM up, Big Blue's cloud division posted double-digit revenue in the third quarter. Revenue from IBM's cloud business increased by 19% to $6 billion in Q3, which somewhat offset weakness in other sectors.

On Monday's earnings call, Chief Financial Officer James Kavanaugh said IBM's full-stack capabilities with Red Hat drove over $24 billion of cloud revenue over the last 12 months, which was up 25%, according to a Seeking Alpha transcript.

Earlier this month, IBM CEO Arvind Krishna, who was formerly in charge of IBM's cloud division, announced it would spin-off its IT infrastructure services unit, which is currently being called "NewCo," from its high-margin open hybrid cloud and AI solutions that account for more than half its revenue.

FREE DAILY NEWSLETTER

Like this story? Subscribe to FierceTelecom!

The Telecom industry is an ever-changing world where big ideas come along daily. Our subscribers rely on FierceTelecom as their must-read source for the latest news, analysis and data on the intersection of telecom and media. Sign up today to get telecom news and updates delivered to your inbox and read on the go.

RELATED: IBM splits up company to better focus on cloud and AI

"Since the announcement, we have had a comprehensive outreach to our clients," Krishna said on the earnings call. "In fact, we have spoken to hundreds of our top clients and I have personally spoken to dozens. The vast majority understand the strategy and are excited about what it means for them, whether they’ll be predominantly future IBM clients, or NewCo clients."

Both Kavanaugh and Krishna said IBM's customers are facing short-term challenges, which, along with Covid-19, has led to uncertainty in regards to the recovery of the global economy. On the other side of the coin, the pandemic has accelerated businesses' digital transformations as they move more data and workloads to the cloud.

"Regarding today’s environment, clients continue to balance short-term challenges and opportunities for transformation," Krishna said. "In the short-term they are focused on operational stability and cash preservation. We see this especially in our larger software license transactions and delays in some services projects. But more of my conversations with CEOs are around how they become digital businesses."

IBM's executives declined to provide guidance for the current quarter due to the uncertainty around Covid-19 and the recovery of the global economy.

IBM's Q3 numbers

IBM's total revenue was down 2.6% to $17.56 billion in the third quarter, but it exceeded analysts' projections of $17.54 billion. Minus the impact from currency and business divestitures, sales declined 3.1%. IBM's global technology services segment was down 4% in revenue to $6.5 billion.

Suggested Articles

ServiceNow is boosting the artificial intelligence (AI) capabilities in its applications for enterprises with a deal to buy Canadian startup Element A

Ahead of next year's expected deployments of 5G, Dish Network announced fiber agreements on Monday with Everstream, Segra, Uniti and Zayo.

Telefónica has notched a third deployment of edge nodes in its home country of Spain with a recent launch in Seville, Spain.