On Monday, International Business Machines (IBM) beat estimates for second-quarter profit and signaled that demand in its cloud computing business would get a boost as large corporations accelerate their digital shift due to the coronavirus crisis.
The company has jettisoned some of its legacy business to focus on the high-margin cloud computing business, an area that has seen a lot of action in recent years as companies ramp up their digital shift to boost efficiency.
IBM’s new boss Arvind Krishna said on a post-earnings call with analysts that “The trend we see in the market is clear.
Clients want to modernize apps, move more workloads to the cloud, and automate IT tasks.”
Revenue from the cloud business, previously headed by Krishna, rose 30 percent to $6.3 billion in the second quarter.
In April, Krishna took over as chief executive officer from Ginni Rometty, while appointing former Bank of America Corp’s top technology executive, Howard Boville, as the new head of the cloud business.
James Kavanaugh, CFO, told Reuter that IBM’s global business services unit was affected as clients cut or delayed spending on discretionary projects due to COVID-19. Sales in the unit fell 7 percent to $3.9 billion.
Kavanaugh said that while Western Europe and the Asia Pacific showed a pickup in client spending during June, the US, and Latin America customers pulled back as the pandemic impact got worse.
Kavanaugh added that “From a client perspective, our business is more concentrated in large enterprises, which in total have been relatively more stable throughout the pandemic.”
According to IBES data from Refinitiv, IBM’s total revenue fell 5.4 percent to $18.12 billion but came in above analysts’ estimates of $17.72 billion. Excluding the impact of currency and business divestitures, revenue declined by 1.9 percent.
Excluding items, the company earned $2.18 per share, above estimates of $2.07.