Earnings Results: IBM stock ticks higher as mainframe gains fuel earnings beat

Earnings Results: IBM stock ticks higher as mainframe gains fuel earnings beat

IBM is still finding success in mainframes.

International Business Machines Corp. shares ticked higher in the extended session Wednesday after the tech giant topped Wall Street estimates for the quarter thanks to a technology Big Blue would like to rely on much less.

IBM IBM, +0.72%  shares were last up 1% after hours, following a 0.7% gain to close at $144.52 in the regular session. Shares are down 5.8% on the year, compared with a 5.3% rise in the S&P 500 index SPX, +0.22%  and a 1.9% gain on the Dow Jones Industrial Average DJIA, +0.32%  

The best-performing segment of IBM’s business was, again, the legacy mainframes business, an older business that IBM has tried to pivot away from but is currently finding gains amid a refresh. Systems revenue — which includes operating-systems software and the company’s mainframe business, including IBM’s z14 line of servers — jumped 23% to $2.18 billion while analysts were expecting $1.86 billion.

Earlier this year: IBM broke a long losing streak thanks to some of its oldest technology

Overall, the company reported second-quarter net income of $2.4 billion, or $2.61 a share, compared with $2.33 billion, or $2.48 a share, in the year-ago period. Adjusted earnings were $3.08 a share. Revenue rose to $20 billion from $19.3 billion in the year-ago period. Analysts surveyed by FactSet had estimated $3.04 a share on revenue of $19.85 billion.

Revenue from IBM’s “Strategic Imperatives” group has risen 12% to $39 billion over the last 12 months, representing 48% of revenue, the company said Wednesday. But as Bernstein analyst Toni Sacconaghi pointed out in a note, a lot of SI growth comes from legacy equipment, with about 40% of mainframe revenue and about 60% of Unix hardware revenue classified as SI revenue.

Technology services and cloud-platform revenue, which includes IBM Cloud fka Bluemix, was flat at $8.62 billion from the year ago period, while analysts were forecasting an average $8.62 billion. IBM said cognitive-solutions revenue, which includes Watson AI, declined 1% to $4.58 billion while analysts expected $4.76 billion.

Global business services revenue rose 2% to $4.19 billion, with analysts estimating $4.17 billion, and Global business services includes consulting for modernizing business design and enterprise and cloud applications, while

Security revenue, which runs across business segments, surged 79 percent from a year ago to $1 billion, IBM said.

Read: IBM earnings: Security is growing fast, but is it enough money to matter?

IBM reiterated its full-year adjusted earnings outlook of “at least $13.80” a share. Analysts, on average, expect $13.77 a share, according to FactSet.

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