Cloud drives IBM’s growth in Q2

IBM Chairman and CEO Arvind Krishna

IBM Chairman and CEO Arvind Krishna

  • IBM reports Q2 revenues up by 3%
  • Cloud revenues up 13%
  • Red Hat sales, engagements ramping
  • Telcos cited as key customers for hybrid cloud platform

Cloud services and products fuelled IBM’s sales growth in the second quarter of this year, with the tech giant’s multiple strands of cloud-related business generating $7 billion in revenues (more than one third of total sales), up by 13% compared with a year ago.

IBM’s total business grew by 3% to $18.7 billion, but it was the cloud-related areas of its operations that accounted for the key pockets of sales growth, including its hybrid cloud platform. 

In IBM’s Cloud & Cognitive Software division (total sales of $6.1 billion, up by 2%), growth in its Cloud & Data Platforms unit – sales of $3.1 billion, up by 8% -- was driven by Red Hat and Cloud Pak, while Red Hat “engagements” also fuelled growth in the Global Business Services division, where consulting services generated revenues of $2.2 billion, up by 11%.

Across all its lines of business, Red Hat’s revenue contribution was up by 20% year-on-year, with IBM Chairman and CEO Arvind Krishna (pictured above) noting during the company’s earnings conference call that Red Hat accounts for “about, in rough numbers, 25% of the [Cloud & Cognitive Software] business,” which suggests second quarter revenues of about $1.5 billion for the company that IBM acquired in 2019 for $34 billion. 

And, as ever, Krishna, was all about cloud trends driving IBM’s business, particularly hybrid cloud.  

“Our strategy around hybrid cloud and AI is resonating among our clients and bears repeating. Hybrid cloud is more than a strategy. It's the reality for our clients today.

They have multiple public clouds, private clouds, on-premise [sic] workloads and are dealing with stringent regulatory and security requirements. Our hybrid cloud platform gives clients the ability to flexibly deploy and manage data and applications across any environment…. Linux Containers and Kubernetes are at the heart of our hybrid cloud platform, allowing clients to write once, run anywhere. Our software portfolio, including Cloud Paks built on Red Hat OpenShift, runs cloud native. Our GBS [Global Business Services] experts work with clients across every industry to accelerate their digital transformation journeys through hybrid cloud and AI. Our systems and industry-specific public clouds provide differentiated infrastructure,” stated the CEO. 

“This platform approach drives compelling economics to IBM and our ecosystem partners. This quarter, we continued to make progress in the execution of our strategy. More and more clients have chosen our technology and services as a lever for business growth. We now have over 3,200 clients using our hybrid cloud platform… That's almost four times the number of clients just prior to our announcement of the Red Hat acquisition,” he noted. “We have now grown to 700 GBS, Red Hat-based client engagements since the acquisition. Our hybrid cloud platform is proving to be of immense value across industries. One example is telecommunication companies, which are among the largest technology spenders each year. We recently announced that major telco clients including Verizon and Telefonica have chosen IBM's hybrid cloud platform to transform their core networks and bring to life the era of 5G and edge computing,” boasted the CEO.

The vendor’s CFO Jim Kavanaugh added: “Our Red Hat practice, which now contributes over one-third of our cloud revenue growth, again, had strong results. This quarter, we added over 170 Red Hat client engagements. The 700 engagements since the acquisition have generated over $2.5 billion of signings. In consulting, revenue was up 11%, driven by the investments we are making in building skills in third-party cloud providers like Microsoft and AWS and in expanding our practices with ecosystem partners such as SAP, Salesforce and Adobe.”

IBM’s results were better than expected, sending its share price up by 3.4% today to $142.75.

- Ray Le Maistre, Editorial Director, TelecomTV

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