IBM posts renewed sales growth

IBM may have won back some investors’ trust after posting renewed sales growth and saying its cloud business is performing well.

Revenue gained 2 percent, adjusted for currency fluctuations, to $20 billion in the second quarter, International Business Machines Corp said Wednesday in a statement. Analysts estimated $19.9 billion.

Profit, excluding some items, was $3.08 a share, compared with analysts’ projections of $3.04 a share.

Still, profit margins are stagnating and the Armonk, New York-based company saw a slight sales decline in the unit that includes its Watson artificial intelligence business. Shares gained about 1 percent in extended trading after closing at $144.52 in New York.

While revenue has declined for most of the past five years, IBM has been asking investors to focus on what it calls strategic imperatives – a collection of newer businesses like cloud computing, AI and security software. The cloud business grew 18 percent, adjusting for currency changes, to $4.7 billion in the quarter.

That’s an improvement from the disappointing 14 percent IBM posted earlier this year.

Strategic imperatives, as a whole, generated $10.1 billion in the period, bringing the company closer to its goal of $40 billion in revenue from the category by year-end.

“It’s probably the best quarter that we’ve delivered in quite some time,” chief financial officer Jim Kavanaugh said in a phone interview.

In April, investors sent the stock tumbling the most in two years after first-quarter growth in the cloud business slowed and margins across the company narrowed.

Cognitive solutions, which includes the much-advertised Watson AI line of businesses, generated revenue of $4.6 billion in the period. Adjusting for currency changes, that means it declined 1 percent year over year. Adjusted profit margins, another key measure for investors, narrowed to 46.5%.

Revenue from cognitive solutions fell because much of the unit is related to transaction software, which is a declining business, Kavanaugh said. Watson is actually growing, he said, though the company doesn’t break out its revenue.

Net income in the recent period was $2.4 billion, or $2.61 a share, from $2.33 billion, or $2.48 a share, a year earlier, the company said.

Read: IBM turnaround questioned on slower growth of new businesses

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IBM posts renewed sales growth