Shares of International Business Machines (NYSE:IBM) lost around 4.7% on Tuesday following a negative revenue report for the second quarter that marks the company’s decline for the 21st quarter in a row.
Second Quarter Earnings
Despite beating consensus analyst estimates of $2.74 per share with their EPS coming in at $2.97 excluding a number of items, their revenue was down once again at $19.29 billion versus analyst estimates of $19.46 billion.
Their second-quarter earnings this year marks the company’s 21st quarter of decline consecutively. Analysts have also predicted that the company would report a missed revenue for the quarter.
The company’s revenue coming from their analytics, cloud, mobile, social and security comes at around $8.8 billion with strategic imperatives contributing to 45% of the company’s total revenue coming from only 42.8% during the first quarter this year.
IBM’s global business services group revenue was down by 3.7% at $4.1 billion while its Systems sector gave off $1.7 billion in revenue and is down by 10.4%. The company’s technology services and cloud platform revenue also declined by 5.1% year over year at $8.4 billion. IBM’s revenue from its cognitive solutions business also lost around 2.5% year over year at $4.6 billion.
For the whole year, IBM stands by its guidance of a $13.80 earnings per share while analysts expect an earnings of $13.68 per share.
AI And Cloud Failure
The company’s cloud services are also struggling. During the quarter, Facebook (NASDAQ:FB) is reportedly planning to remove WhatsApp from IBM’s cloud and move it to their in house data center. IBM which experienced a slowdown in its legacy hardware and software business have tried to transition into more high margin businesses such as data analytics, cyber security, and cloud in its efforts to drive its balances and revenue up.
IBM has been making a couple of large investments in expanding its artificial intelligence and cloud computing business in the past couple of years. Earlier this week, the company launched a new generation mainframe on its Z series with the capability of encrypting all kinds of data associated with all types of applications. The company expects this new update to help drive bigger returns later on. According to IBM chief financial officer Martin Schroeter, the new mainframe addition would be the world’s most powerful transactions system.
Although investors expected IBM’s second quarter to be weak given its previous performances, the company’s third quarter is expected to be better.