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IBM Revenue Beats Estimates on Boost From Cloud Demand

Cloud revenue increased 30% to $6.3 billion in the period ended June 30, helping to offset revenue declines in the tech support units Global Business Services and Global Technology Services, which account for about 56% of IBM’s total revenue.

(Bloomberg) -- International Business Machines Corp. beat analysts’ estimates for revenue in the second quarter, with cloud sales helping offset coronavirus-fueled declines in its consulting services business. The shares gained 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 revenue declines in the tech support units Global Business Services and Global Technology Services, which account for about 56% of IBM’s total revenue. Overall, sales fell 5.4% to $18.1 billion, beating the $17.62 billion analysts had expected, according to data compiled by Bloomberg.

Covid-19 has hit IBM’s services business hard since many of its clients have delayed purchases of information technology or software upgrades to focus on short-term stability and cash preservation to survive the pandemic. Other software makers have reported a similar dip in sales. But Chief Executive Officer Arvind Krishna said clients are seeing value in IBM’s hybrid cloud platform “at a time of unprecedented business disruption.”

IBM shares rose about 4.5% in extended trading after closing at $126.37. They had declined 5.7% so far this year. Earnings excluding some costs fell 31%, to $2.18 a share, coming in above the average analyst estimate of $2.12.

Krishna, who took over from Ginni Rometty in April, is steering the company through a global crisis while also spearheading IBM’s third major transformation in its 109-year history. The Covid-19 pandemic led Krishna to withdraw the company’s full-year earnings outlook in April, and the company didn’t provide a new forecast on Monday. IBM has also cut thousands of jobs in recent months as it reshapes its business.

IBM is hanging its future on cloud computing, aiming to become the leader in hybrid-cloud software and services, which allow clients to store data in private servers and in multiple public clouds, including those run by rivals Amazon.com Inc. and Microsoft Corp. In 2018, IBM spent $34 billion to buy open source software provider Red Hat to aid that transition.

IBM reported Red Hat contributed $867 million in the quarter, adjusted for deferred revenue accounting rules.

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