IBM (International Business Machines Corp.) recorded a considerable uplift in the revenue and profit for the second quarter marked by a valuable benefit resulting from the growth in higher-margin businesses including cybersecurity and cloud computing.
Revenue from these businesses increased by 15% to $10.1 billion in the second quarter, including more than half of the company’s total revenue. The overall revenue rose 3.7% from the previous year to $20 billion, beating analysts’ average estimate of $19.85 billion.
“We’ve done the work to reposition our company,” James Kavanaugh, finance chief said about the focus on the strategic imperatives markets. “We are seeing our investments in these high-value segments of the IT industry now paying off.”
IBM has been focusing on a range of new technologies from artificial intelligence to cloud computing where it aims to balance the weakness in its legacy business of selling hardware and software. The fresh businesses, which are present across its various divisions, have been bundled into what the company calls “strategic imperatives”.
IBM shares rose 0.7% to $144.52 during Wednesday trading. In after-market trading, they were ahead 0.6%. The company reported a profit of $3.08 a share. IBM’s margins fell in the latest quarter. The gross profit margin of 46% was slightly down from 46.5% in the year-earlier period.
“One of the key components was as-a-service growth … and as that scales through, you’re starting to see margin expansion shine. Gross margin closed the gap,” CFRA Research analyst David Holt said.
The company’s revenue has now increased for three consequent quarters after falling for nearly six years. Net income increased to $2.4 billion in the quarter ended June 30 from $2.33 billion a year earlier. Operating gross profit margin in the quarter slipped to 46.5% from 47.1%.
The recent quarterly report was in favor of the technology giant IBM, and it might be interesting to witness whether it will be beneficial in the next quarter or not.