IBM has come out with its financial report for the third quarter, and some of its newer businesses, including cloud and Watson, finally appear to be turning into real money spinners. The company has reported better than expected revenues and earnings, thanks to the profits generated via Cloud and its intelligent assistant, Watson.
In its third financial quarter reports, IBM reported earnings of $2.9 billion. The figure equates up to $2.98 per share in earnings, while the company’s Non-GAAP earnings for the third quarter were $3.29 per share. The figure exceeds that predicted by most financial pundits, who had pegged down $3.23 as IBM’s earnings per share for the quarter.
The company also generated a Non GAAP revenue of around $19.2 billion.
Meanwhile, the company says that some of its new programs were instrumental in the revenue it generated. Along with cloud, Watson, Internet of things and analytics managed to account for a total of 40 percent of IBM’s revenue stream. While cloud alone was worth $3.4 billion, Watson, iOT and analytics were responsible for churning out a further $8 Billion.
Meanwhile, as per IBM’s report, cloud as a service revenue run rate was equal to $7.5 billion. According to IBM CEO Ginny Rometty, these figures are all thanks to increasing consumer adoption of these newer services. Apparently, consumers are exhibiting plenty of excitement over the company’s cloud, Watson and blockchain technologies and that is propelling growth.
However, while its newer businesses appeared to be on a path to strong growth and managed to take the company all the way to a good Q3 report, some of its older businesses appear to be not doing as well as they were doing a couple of years ago.
For example, IBM’s global business services revenue was merely $4.2 billion, and indeed, was down 2 percent in constant currency. Similarly, gross margin for newer technology and cloud fell from the year past due to the increased cost of maintaining its now larger technical support services. The company’s systems unit, which once formed a very important part of its business, saw a 21 percent decline in its revenue stream as well, which fell down to $1.6 billion.
So yes, some of the company’s well established businesses are actually showing signs of slowing down. However, the new units and initiatives, including Cloud, Analytics, iOT and Watson, are going stronger than ever and are managing to drive business for the company, which is good news. Meanwhile, IBM will likely continue enhancing and doubling down upon its capabilities in these areas, as evinced by its recent announcement of a Munich based HQ for Watson, which the company is also hoping to integrate within its iOT services.