IBM Q1 Shows Systems Drag While Firm Reaches Toward The Cloud (And Blockchain)

Blockchain got a few mentions during IBM’s conference call with analysts after earnings were released Tuesday (April 16) after the markets closed. Artificial intelligence (AI) got more exposure, tied in part to the continuing strategy of embracing the cloud.

In terms of headline numbers, adjusted earnings per share came in at $2.25, beating expectations by three pennies.

Revenues missed expectations, at $18.2 billion; the Street had been looking for $18.5 billion. The latest top-line tally marked a 5 percent decline from a year ago, and continued the reconfiguring of certain business lines and outright sales of other units. By way of example, during the quarter, the tech giant sold its mortgage servicing business to Mr. Cooper Group. And in the latest quarter, IBM changed the way it reports results – what was once the Technology Services & Cloud Platforms segment is now the Cloud & Cognitive Software and Global Technology Services segment.

The Global Technology Services segment – tied to tech infrastructure and support of that infrastructure – saw revenues of $6.9 billion, down 7 percent. Business services were $4.1 billion, roughly flat. Systems sales slipped 11 percent as mainframe and other hardware demand slid, and demand seemed soft in emerging markets. CFO James Kavanaugh pointed to the Asia Pacific (AP) region, which saw revenue deceleration.

The cloud and cognitive software results, which focus on cloud data and transactions, also saw revenue declines, albeit more muted, with $5 billion in sales, off 1.5 percent year on year. The firm does not break out the revenue contribution of efforts that are driven by and embrace AI or blockchain.

Separate from the call and the latest results, in the past it has been noted that IBM has filed for a number of blockchain-related patents. For example, the company said it has worked with the shipping firm Maersk to help streamline international logistics. The collaboration, known as TradeLens, uses smart contracts to handle bills of lading and other documentation used in freight. Before that announcement, IBM said it is working with Walmart to improve the latter’s food business supply chain.

In further detail on first-quarter results, Kavanaugh said the company in general had “strong performance in offerings that help clients with their digital transformation and journeys to cloud.” Cloud growth accelerated to 12 percent, measured in constant currency, said the executive.

Cloud revenues are at $19.5 billion through the past year, said management. Software sales have been driven by hybrid cloud products (with data and AI platforms), security and solution and areas like supply chain and Watson Health.

“These offerings are increasingly being infused with AI and then transaction processing platforms, including the middleware and database software that supports our clients’ mission-critical workloads,” said Kavanaugh.

Management said that in terms of concrete examples of demand for cloud and business automation – and as is germane to payments – one European tax authority is using the firm’s digital business automation platform to “re-design their tax processes around their data lake and improve the tax payor experience.”