IBM reports mixed Q2 earnings as slump drags on despite cloud growth

Red Hat’s financials to be incorporated into updated cloud forecast in August

IBM reported quarterly earnings this week showing strong cloud growth despite revenue slumping for the fourth quarter in a row, to $19.2 billion.

The cloud and cognitive software division, buoyed by 5 percent growth to $5.6 billion in sales, represents Big Blue’s strategic priority, IBM CFO Jim Kavanaugh said.

Within that division, Cloud and Data Platforms posted the strongest performance with 7 percent growth. Kavanaugh attributed the results to strong hybrid cloud sales leveraging IBM private cloud technology.

Speaking eight days after Big Blue completed its $34 billion acquisition of Red Hat, Kavanaugh was ebullient about the future of IBM’s cloud efforts, calling the acquistion an “important milestone” for IBM and the cloud landscape as a whole.

Red Hat’s 2019 fiscal year revenue topped $3.4bn, financials that will be incorporated into an updated cloud forecast released in a few weeks, Kavanaugh added.

Kavanaugh said that Red Hat’s open cloud technologies will be instrumental in delivering the hybrid, multicloud, open approach demanded by industries across the board as organisations shift more mission-critical workloads to the cloud – a phase Kavanaugh called the “the next chapter of cloud adoption”.

“We maintained our momentum in the second quarter, again expanding gross profit margin and growing free cash flow, driven to a great extent by our increasing mix of high-value offerings for clients,” said Kavanaugh.

“On August 2, we will discuss how the acquisition of Red Hat will accelerate IBM’s revenue growth, contribute to our high-value model and enhance our free cash flow generation going forward.”