IBM reported second-quarter 2021 financial results that exceeded modest expectations, bolstered by continued strong growth from its Red Hat-led hybrid cloud operations and ongoing confidence that it will meet lofty financial goals. The news was an appreciated upside to counter the recent exit of a top Red Hat executive.

IBM reported a modest 3% increase in overall revenues to $18.7 billion for the quarter compared with the same time period last year. That number actually was flat when adjusting for divested operations and currency fluctuations, but was still slightly ahead of what analysts were expecting.

The vendor’s cloud business accounted for $7 billion in Q2 revenues, which was up more than 9% compared to the previous year. That segment was led by a 30% increase in its Global Business Services (GBS) unit, which includes its professional services and management operations, a 25% revenue increase from its Cloud and Cognitive Software business, and a 17% increase in Red Hat-related revenues.

Overall, IBM’s cloud businesses generated $27 billion in revenue over the past year, which represented a 13% annual improvement.

Looking ahead, IBM’s management cited improved economic conditions that could further pad operations.

“The overall spend environment continues to improve,” IBM CFO Jim Kavanaugh said, according to a Seeking Alpha transcript. “With the economy reopening in many parts of the world, many markets and industries are getting back on track. We see this in North America and in select industries.”

Kavanaugh added a specific mention of the United Stated, Canada, and parts of Europe to that equation.

While the top line saw modest improvements, a corresponding increase in spending muted its bottom line. Net income remained basically flat year over year. The company hopes to boost that margin equation by investing in its hybrid-cloud focus and removing lower-margin operations like its soon-to-be-evacuated and re-named infrastructure business.

Kavanaugh explained that “much of the savings from our structural actions and as a result this will keep expense levels higher.”

Despite the glowing overall numbers, analysts remained muted due to that continued spending proposition.

BMO Capital Markets Analyst Keith Bachman noted in a report that he expects IBM’s operating margins could come in below expectations over the “next few quarters as IBM invests to stimulate growth.”

IBM CEO Arvind Krishna added that the vendor remains on track to hit its goal of up to $12 billion in free cash flow by year-end. That builds on the $10.5 billion IBM generated last year and builds toward an early estimate of up to $13 billion next year.

IBM also touted expected progress in its GBS unit, which witnessed a significant downturn in gross profit margins for the quarter. Kavanaugh linked some of that to increased hiring in that business during a challenging job market.

“There is a war for talent going on,” Kavanaugh said. “We are investing significantly. We're bringing thousands and thousands of GBS practitioners in through the first half and we feel pretty good about what the profile of that business is going forward.”

IBM’s latest results also come on the heels of long-time Red Hat executive Jim Whitehurst’s sudden departure from IBM earlier this year. Whitehurst had been serving as president of IBM, a title he received in exchange for his previous CEO title at Red Hat following IBM’s $34 billion acquisition.

“Jim worked on many parts of our strategy, including the integration of Red Hat,” Krishna added during the prepared remarks of the earnings call. “Nearly three years since we announced the acquisition, there is no doubt this integration has been successful. Jim remains a strong believer in IBM and our strategy. Given his background, I understand his desire to become an investor.”

Whitehurst’s departure was initially announced on a Friday before a long holiday weekend in the U.S. In a recent interview with Barron's, Whitehurst said that he made the move because he wanted to lead a company and did not see that opportunity at IBM in the near term.

Krishna earlier this month told CNBC that Red Hat CEO Paul Cormier was "not going anywhere."