IBM reported another difficult fiscal quarter highlighted by ongoing customer struggles tied to the COVID-19 pandemic, a positive return on its $34 billion Red Hat investment, internal IBM upheaval that will see it focus on hybrid cloud, and ongoing optimism from IBM management that it can somehow turn it all around.

The fiscal strife continues what has been a similar tone from IBM. The company’s third-quarter results included a year-over-year dip in revenues, though strategic belt tightening allowed it to maintain a relatively flat bottom line.

Specifically, IBM’s overall revenues were down nearly 3% year over year to $17.6 billion. That dip continues the ongoing quarterly trend that has IBM’s revenues down nearly 4% through the first three quarters of 2020 compared with 2019. Despite the latest quarterly revenue drop, IBM managed to trim operating costs a similar amount, which allowed its net income to remain flat at $1.7 billion for the latest quarter.

On the plus side, IBM’s results were in line with what it had forecast earlier this month.

IBM CFO Jim Kavanaugh explained that customers are continuing to hold their financial investments close to the chest in light of the COVID-19 pandemic. This has seen them continue to focus their spending on services rather than products as evident from IBM’s mainframe business posting a 20% year-over-year drop in revenues.

“Clients’ near-term priorities continue to include operational stability, flexibility, and cash preservation, which tends to favor opex over capex,” Kavanaugh said, according to a Seeking Alpha transcript of IBM’s Q3 call. “This is resulting in some project delays and purchase deferrals, which we see in perpetual software licenses and project-oriented and volume-based services.”

A more positive tone was struck from IBM’s Red Hat operations, which continue to post robust fiscal growth. The latest quarter witnessed that division post a 17% year-over-year increase in revenues, which helped IBM’s overall cloud revenues surge 19% to $6 billion in the latest quarter.

That Red Hat growth was also the center of IBM’s decision earlier this month to spin off its legacy services business so that it could continue CEO Arvind Krishna’s mission of re-focusing IBM on its hybrid cloud operations. That move will see IBM’s Managed Infrastructure Services and Global Technology Services (GTS) business units deposited into their own public company currently dubbed “NewCo.”

Krishna spun the move as stating it will allow those units to somehow reverse their current paths of declining revenues once they are unencumbered by growing hybrid-cloud business.

“NewCo will have greater agility to design, run, and modernize the infrastructure of the world’s most important organizations,” Krishna explained in a statement. “Both companies will be on an improved growth trajectory with greater ability to partner and capture new opportunities – creating value for clients and shareholders.”

Despite the enthusiasm, IBM’s GTS business posted a 4% year-over-year drop in revenues, which was also similar to what it did the previous quarter. IBM management noted that segment “continues to experience lower client-based business volumes in the more economically sensitive industries” tied to the pandemic. However, the positive spin is that GTS contract signings is up 12% year to date, including 19 deals valued at more than $100 million.

IBM’s management also did not provide any Q4 guidance. However, Krishna did what all executives of a floundering business are hired to do and sounded a positive tone.

“Over the coming months, we’ll further advance our strategy by taking actions to simplify and optimize our model, increase investments in key areas, and fostering much more of a growth mindset,” Krishna said during the Q3 call.

Analysts in general are neutral on IBM’s near-term operations, noting that Krishna’s latest move to increase the company’s focus on the highly competitive hybrid cloud market will need some time to play out. According to a Barron’s story, BMO Capital’s Keith Bachman noted in a research report that IBM is making the right move to focus on its Red Hat business, but that its “underlying business trends remain weak” and “patience will be required.”