IBM Earnings Show Enterprise Shift To The Cloud

IBM‘s revenue fell 5.4 percent in the second quarter due to the reduced spending on computer equipment during the pandemic in lieu of going digital on the cloud, Financial Times (FT) reported.

Areas like applications development, transactions processing and consulting saw dramatic drop-offs, which caused the company to lose ground, FT reported.

The company’s shares have fallen around 15 percent since the pandemic began, and year over year in the three months ending in June, the company saw a drop in revenue from $19.2 billion to $18.1 billion, according to FT.

The company said it had not all been bad — it had seen a 30 percent increase in the revenue for cloud needs in the last quarter, going from $4.8 billion last year to $6.3 billion now, according to FT. Around $900 million of that amount came from IBM’s acquisition of open source company Red Hat for $34 billion.

But Chief Financial Officer Jim Kavanaugh said the company’s revenue had been ebbing and flowing as the pandemic hit and then started to recede briefly in June. He said things had gotten better in June as cases seemed to be dropping off a bit, although he didn’t say how the new spikes in infections had affected IBM, FT reported.

Net income was $1.36 billion, down 46 percent from the same time last year, according to FT, and pro forma earnings per share fell from $3.17 last year to $2.18 now. Despite all of that, though, the numbers were still better than what analysts had forecast, with Wall Street having thought IBM would reach revenue of $17.7 billion and earnings per share totaling $2.07.

The shift of many businesses and financial institutions to the cloud came quick due to the pandemic, which made it necessary for companies to conduct business in ways that could keep up with social distancing needs for customers, according to Ariff Kassam, chief technology officer for cloud and distributed SQL database company NuoDB in a PYMNTS Tracker.

Kassam said it was important for businesses to be able to perform quick customer service needs during the pandemic and added that it could be an opportunity for them to do away with outdated older systems.