Revenues fell 4.7% versus a year ago to $19.29 billion, missing the $19.47 billion that was expected.
IBM has seen its revenue decline for a 21st consecutive quarter as its legacy business continues to weigh down its emerging divisions.
Revenues in storage were "led by strong double-digit growth in our all-flash array offerings". Cloud revenue is up 15% over the previous year, and the company brought in $3.9 billion in the second quarter from its cloud business. (4) Infrastructure Services, the largest part of GTS, down 5% despite some success moving clients to cloud as IBM exits lower-margin business; and (5) transaction processing software down 5%-the days of software boosting margins by growing faster than the corporate average may be past.
CFO Martin Schroeter told shareholders during IBM's second-quarter earnings call that gains across cloud, analytics, mobile, social and security, while more modest than in recent quarters, were entirely organic, with a spate of recent acquisitions now fully absorbed by the company. More specifically, the company has said that it is aiming squarely toward architecting a single cloud platform tuned for artificial intelligence, high-performance computing and other heavily data-centric use cases. The bright spot in Tuesday's earnings release was a 17 percent increase in cloud revenue, although it's not clear exactly what IBM considers "cloud" revenue. IBM reiterated a forecast for this year of "at least" a $13.80-a-share profit for 2017 before certain costs, while analysts peg it at $13.68.
The company has struggled to keep those new businesses growing at a pace that outweighs the decline in its old ones.
However, revenue from "strategic imperatives" rose 11 percent to $34.1 billion over the past 12 months, the company said.
IBM saw year-on-year growth in its cloud business of 15 per cent, up to $3.9bn, but the Technology Services and Cloud Platforms division which encompasses cloud saw revenue drop five per cent to $8.4bn.
"IBM operates cloud data centres in almost every major market around the world, ensuring that our clients can keep their data local for a variety of reasons - including performance, security or regulatory requirements", Considine says.
"The whole cognitive software market for artificial intelligence was $1.5 billion a year ago".
IBM stock closed Tuesday at $154 per share, but fell more than 3 percent in after-hours trading after the financials were made public. Warren Buffett's Berkshire Hathaway Inc. sold about a third of its investment in IBM during the first half of this year.