IBM revenues fall for third quarter in a row despite cloud surge

The revenues of computing giant IBM declined by 2.6% year-on-year during the third quarter of 2020, with the company reporting $17.6 billion of income fuelled chiefly by a surge in cloud revenue.

This dip represented the third quarter of consecutive year-on-year revenue decline for the company, with IBM’s systems division, global business services and global technology services and global financing sector suffering over the last three months.

The positive trend in terms of the firm's cloud business also continued, following a 30% spike in cloud revenue during the previous quarter, and 19% growth in the three months before that.

The company’s cloud computing divisions, particularly its cloud and data platforms division, led by Red Hat, grew by 7% year-on-year, bucking the wider business trend. Within this segment, cloud and data platforms grew 20%, while cognitive applications grew 1%.

These financial results have emerged only days after the company announced it plans to divide its business in half, spinning its infrastructure services unit into a separate entity while going all-in on the cloud.

“The strong performance of our cloud business, led by Red Hat, underscores the growing client adoption of our open hybrid cloud platform," said IBM CEO Arvind Krishna.

"Separating the managed infrastructure services business creates a market-leading standalone company and further sharpens our focus on IBM's open hybrid cloud platform and AI capabilities. This will accelerate our growth strategy and better position IBM to seize the $1 trillion hybrid cloud opportunity.”

The company’s plans to pour all its efforts into its cloud business will, on paper, be justified based on these most recent financial results, with the general health of cloud computing improving following the COVID-19 pandemic.

The firm’s global technology services division, which includes infrastructure and cloud services as well as technology support services, contracted by 4% year-on-year, with cloud revenue within this segment up 9%.

The systems division, meanwhile, saw revenues of $1.3 billion, down 15%, driven by declines in IBM Z and Storage Systems. This is reflective of the impact of product cycle demands, the company said.

As part of the spin-off, IBM wants to create two separate companies by the end of 2021, with the to-be-cleaved infrastructure business, dubbed NewCo, making way for IBM to focus on AI capabilities and hybrid cloud.