IBM sees double-digit AI and Red Hat growth in Q2
“AI is a transformative technology that has the potential to unlock tremendous business value …This past quarter, we made strategic moves to bolster our hybrid cloud and AI capabilities,” said IBM CEO Arvind Krishna
IBM's second quarter 2023 financial results reflect the success Big Blue is seeing in its hybrid cloud and AI strategy, according to the company's executives.
Vendor CEO Arvind Krishna called hybrid cloud and AI the "two key drivers of business innovation" during the company's Q2 earnings call.
"AI is a transformative technology that has the potential to unlock tremendous business value," he said. "This past quarter, we made strategic moves to bolster our hybrid cloud and AI capabilities."
Krishna spotlighted Watsonx, IBM's AI and data platform that provides self-service access to partners and businesses so they can build and refine generative AI foundation models and traditional machine-learning systems.
"To date, the platform has been shaped by more than 150 businesses across industries from telcos to banks. Businesses around the world are excited about tapping foundation models and machine learning in one place with their own data to accelerate generative AI workloads," he said.
"IBM is also working with an expanding ecosystem of partners to co-create and innovate across industries and use cases, from space to sports."
Software segment as a bright spot
IBM's software arm - which houses hybrid cloud, Red Hat, automation, data, AI and security - was the company's fastest-growing division.
The segment brought in $13.6bn in revenue, an increase of eight per cent year over year.
"This performance reflects growth across both our recurring revenue base -- which is about 80 per cent of annual software revenue -- as well as transactional revenue," said IBM CFO James Kavanaugh.
Year over year, Red Hat's revenue grew 11 per cent. Automation was up just two per cent. Data and AI also climbed 11 per cent.
Security meanwhile dipped one per cent. IBM did not break out most of the revenue figures for divisions within its software segment.
Within software, the company did report hybrid platform and solutions' revenue of $4.7bn, which grew seven per cent year over year ignoring foreign exchange. Transaction processing increased ten per cent to $1.9bn, driven by in part by strong software renewal rates, Kavanaugh said.
Infrastructure slump
The infrastructure segment on the other hand - which includes zSystems, hybrid infrastructure, distributed infrastructure and infrastructure support - saw revenue for the quarter of $3.6bn, falling 14 per cent year over year.
Similar to the software segment, IBM did not break out all of the revenue figures for divisions within the infrastructure segment.
Hybrid infrastructure decreased by 18 per cent to $2.3bn. zSystems fell 30 per cent, distributed infrastructure dropped by six per cent and infrastructure support shrank six per cent to $1.4bn.
IBM's infrastructure revenue in any quarter reflects product cycle dynamics, Kavanaugh said. "As expected, [there was a] disproportional impact the overall revenue growth this quarter, given the very successful launch of [IBM] z16 in the second quarter last year," he said.
Overall Q2 2023 results
For the second quarter of 2023 that ended June 30, IBM reported revenue of $15.5bn, a result that stayed flat year over year.
Americas revenue accounted for $8bn, according to the company.
The tech giant posted adjusted earnings per share of $2.18 cents which beat Wall Street's estimates of $2.01 per share. Net income for the quarter rose 13 per cent to $1.6bn, up from $1.4bn one year ago.
IBM's stock traded at $135.48 a share after hours on Wednesday, up less than one per cent.