IBM Q2 results top earnings estimates with Red Hat wins – but revenue falls

IBM logo on a computer | IBM Q2 results

Key Takeaways

IBM's Q2 earnings exceeded expectations at $2.18 per share, while revenue fell slightly to $15.5 billion, missing analysts' estimates.

The company's growth was driven by advances in hybrid cloud and AI, with Red Hat's revenue increasing by 11% and software revenues growing by 7.2%.

IBM has formed strategic partnerships, including with Nokia and Air Canada, and announced plans to acquire Apptio to enhance its hybrid cloud and AI capabilities.

IBM has released its second quarter results with earnings exceeding analysts’ estimates, but overall revenue missed the mark.

The tech giant’s earnings exceeded expectations reaching $2.18 per share, which was adjusted from the $2.01 per share estimate, according to financial data business Refinitiv.

At the same time, Big Blue’s revenue was down 0.4 percent to $15.5bn, up 0.4 percent at constant currency, with software and consulting revenue leading the way. Infrastructure revenue meanwhile was down 15 percent. This missed analysts’ estimates that projected revenue of $15.6bn, according to Refinitiv.

Arvind Krishna, IBM’s chairman and CEO attributed the success and progress in business innovation to the firm’s advances in hybrid cloud and AI, singling out subsidiary Red Hat’s revenue increase of 11 percent.

Krishna said in a statement: “Hybrid cloud is the most widespread form of IT architecture. Red Hat OpenShift, our leading container platform based on open-source innovations, plays a crucial role in making this possible, along with IBM software and infrastructure. 

“Our consultants use their technical and business knowledge to speed up clients’ digital transformation journeys and help drive adoption of our technology platforms. Our broad ecosystem of partners amplifies our reach and ability to meet client demand.”

In addition, the firm’s software revenues grew 7.2 percent to $6.6bn as data and AI were up 10 percent and hybrid platforms and solutions reached 6 percent.

However, automation saw a modest upward trend of 1 percent while security was down 2 percent.

Some of IBM’s key collaborations from the past quarter include the strategic partnership with Nokia, where Red Hat OpenShift became the preferred platform provider to Nokia’s core network applications business, as well as the hybrid cloud approach to help Air Canada improve its digital footprint, website, mobile application and loyalty program.

IBM Consulting also embarked on a significant global digital transformation to improve Diageo’s customer satisfaction, optimize business workflows and enhance the drink giant’s financial performance reporting capabilities.

Krishna also noted that over the past quarter that IBM had made further strategic moves to bolster its hybrid cloud and AI capabilities with the announcement of plans to acquire Apptio, which offers a virtual command center for CEOs, CFOs and CIOs to manage their technology investments.