Wall Street is disappointed
IBM's revenues were down 4.7 per cent to $18.18bn for its Q1. It meant that the vendor was almost $280m short of analyst expectations of $18.46bn.
Net income was also down five per cent to $1.6bn from $1.68bn in Q1 2018.
Wall Street investors were quick to react. Immediately following the news, IBM shares fell by as much as four per cent on Tuesday afternoon.
It marks the third consecutive quarter of declining revenue year over year.
Cloud revenues are up
But, in an earnings call transcribed by Seeking Alpha, IBM's CFO Jim Kavanaugh highlighted that the vendor's cloud earnings were up, and by double digits.
"We continue to take actions to invest to lead in the emerging high-value areas of the IT industry. You saw this play out in our results. Our cloud growth accelerated to 12 per cent at constant currency and our cloud and cognitive software was up two per cent," he said.
Kavanaugh pointed to improvements in IBM's cloud computing segment and a specific focus on enabling hybrid environments, in an attempt to convince analysts that IBM is keeping up to speed with the latest purchasing trends in cloud computing.
"Over the last several months, we've talked about the next chapter of cloud, which focuses on shifting mission-critical work to the cloud and optimising everything from supply chain to core banking systems," he said.
"This requires a hybrid multi-cloud open approach. And so we have been reshaping our business to address this opportunity, investing heavily to build capabilities across our business, like IBM cloud, IBM cloud private and IBM cloud private for data, the IBM multi-cloud manager, cloud garages, cloud migration services and cloud optimised systems."
Kavanaugh said these investments have help IBM log "$19.5bn" in cloud revenue over the last 12 months.
He also referenced IBM's recent decision to enable Watson AI - its flagship data and analytics platform - to be deployed across its competitors' environments, including VMware, AWS, Azure, and Google Cloud Platform.
As CPI reported at the time, IBM's strategy is to drive further growth by "bringing artificial intelligence capabilities to where customers' data is".
IBM is urging patience over its $34bn Red Hat acquisition
In October, IBM stunned the market with the world's largest ever software acquisition.
At the time, one analyst called the buy "a desperate deal" by a company that had missed the boat on cloud computing in a market now dominated by the big hyperscalers.
But Big Blue recently reiterated that Red Hat is due to be integrated into IBM in the second half of 2019, and asked the market to be patient.
CNBC reported that a message by Nomura Instinet analysts was sent to IBM customers last week reassuring them of the benefits that Red Hat will bring to the IBM fold.
"IBM is winning new, even cloud-native, customers before Red Hat," the note is reported to have read.
"OpenShift [a Red Hat product] should help IBM win new customers and new workloads as enterprises begin to usher mission-critical applications from on-premise to public or private clouds."
On yesterday's earnings call CFO Kavanaugh added that the two companies are "ideally positioned to help our clients shift their business applications to hybrid cloud".
"This will not only enhance the growth of the Red Hat business after closing, but also the IBM business... we saw more of our data and AI software on containers across multiple platforms and more of our services from app modernisation to multi-cloud managed services," he said.
IBM's legacy segment and emerging markets revenue was down
Kavanaugh was quick to point to disappointing revenues in emerging markets as being partly responsible for IBM's failure to meet analyst earnings expectations.
"We did have weaker performance in the emerging markets in Asia-Pacific, which affected our overall revenue performance," he said.
Broken down by segment, IBM's global technology services segment - its largest - logged sales of $6.88bn, down seven per cent year over year.
Meanwhile, its global business services business segment was stable at $4.12bn revenue, and systems revenue fell 11 per cent to $1.33bn.
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