Cloud fuels IBM’s first quarter of growth since 2018

Year-on-year revenue creeps up by 0.1% to $21.8 billion while Red Hat growth ballooned by 24%

IBM logo on a brown background

IBM has pinned its first quarter of growth for more than a year on the changing fortunes of its cloud division, following five  consecutive quarters of declining revenue.

The technology giant grew by 0.1% in the final quarter of 2019 versus the same period the previous year, recording revenues of $21.8 billion (£16.7 billion). This can be attributed to a 21% rise in total cloud revenue, which hit $6.8 billion.

Full year revenue for 2019 declined by 3.1%, however, dropping from $79.6 billion (£60.9 billion) in 2018 to $77.1 billion (£59 billion) last year.

"We ended 2019 on a strong note, returning to overall revenue growth in the quarter, led by accelerated cloud performance," said IBM chairman, president and CEO Ginni Rometty in a statement.

"Looking ahead, this positions us for sustained revenue growth in 2020 as we continue to help our clients shift their mission-critical workloads to the hybrid cloud and scale their efforts to become a cognitive enterprise."

Its open source software subsidiary Red Hat, for which IBM closed its $34 billion (£26 billion) acquisition last year, also grew by 24% year-on-year. The company now forms part of IBM’s cloud and cognitive software division, which in total grew by 8.7% to record revenues of $7.2 billion (£5.5 billion).

The firm initially submitted a bid to acquire Red Hat in late 2018 in order to enhance its hybrid cloud portfolio.

The move was largely seen as a shock and was branded a potential disaster by Puppet’s vice president of ecosystem engineering Nigel Kersten. However, these latest figures seem to prove the naysayers wrong.

"In 2019, we continued to invest in the higher-value growth areas of the industry and took bold actions – including several divestitures and a major acquisition – to position our business, which are reflected in our strong gross margin performance," added IBM’s senior vice president and CFO, James Kavanaugh.

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"After completing the acquisition of Red Hat, and with strong free cash flow and disciplined financial management, we significantly deleveraged in the second half."

Elsewhere, in terms of IBM’s performance in the fourth quarter of 2019, its global business services division declined by 0.6%. Its global technology services, meanwhile, including infrastructure and cloud services as well as support services, dropped a sharper 4.8%.

IBM's systems division, however, sustained an impressive growth of 16%, which translated to revenues of $3 billion (£2.29 billion). The main culprit was IBM Z, which alone saw a staggering 62% growth year-on-year.

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