Cloud now represents 20 percent of IBM’s total revenue. This revenue stream hit $15.8 billion over the last 12 months, up 25 percent year-over-year. Third-quarter cloud revenues increased 20 percent to $4.1 billion.
The company’s third-quarter security revenue ($600 million) jumped 51 percent from a year earlier.
Meanwhile total revenue in the third quarter was $19.2 billion, a decrease of less than 1 percent year-over-year.
On an earnings call with analysts, IBM CFO Martin Schroeter credited security and cognitive features embedded in the company’s hardware and software products with boosting its security revenue.
“Clients found threats 60 times faster than manual investigations, and complex analysis went from an hour to less than a minute,” Schroeter said.
Both cloud and security, along with as-a-service offerings, Watson, and mobile are part of IBM’s strategic imperatives business, which represents 45 percent of IBM revenue. Strategic imperatives revenue reached $34.9 billion over the last 12 months, growing 10 percent year-over-year. Third quarter revenue was up 11 percent.
As IBM Cloud has struggled to keep pace with competitors Amazon Web Services (AWS) and Microsoft Azure, the company has taken steps to position its cloud as the most enterprise-friendly cloud. This includes building a global network of cloud data centers and targeting specific industries like healthcare and financial services with its cloud-based Watson artificial intelligence (AI) and blockchain services.
Schroeter emphasized this theme on the earning call. “Keep in mind, the IBM Cloud is built for the enterprise. It is the only cloud that integrates public, private, multi-cloud and traditional data centers through a single architecture and is designed for cognitive workloads.”
In a research note, BMO Capital Markets analyst Keith Bachman called IBM’s third quarter earnings “reasonable results” and raised its stock target price to $170 from $167.
“Bottom line, we think IBM had a reasonable quarter,” Backman wrote. “We believe a key for IBM’s stock will be IBM’s ability to maintain or improve CY18 operating margins and/or operating profit, even as we remain skeptical that IBM can grow CY18 revenues.”