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How IBM’s Cloud Offerings Performed in Fiscal 2Q17

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Jul. 28 2017, Updated 7:39 a.m. ET

IBM’s cloud business’s annual run rate

For the past 12 months, International Business Machines’ (IBM) Cloud revenue stands at $15.1 billion. On a constant currency basis, IBM’s Cloud Services segment revenues rose 17.0% to $3.9 billion, while its cloud-as-a-service run rate rose 32.0% (in constant currency terms) and reached an annual run rate of $8.8 billion in fiscal 2Q17.

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Cloud offerings and growth rates

Compared with IBM’s cloud offering annual run rates, Amazon’s (AMZN) AWS has an annual run rate of about $15 billion, while Microsoft’s (MSFT) commercial cloud annual run rate stands at $18.9 billion.

But how does the picture change if we delve deeper into these offerings?

We know that IBM is a leader in private and hybrid clouds. A significant portion of its cloud revenues come from these subsegments, which belong to a slow growth category. Its cloud-as-a-service subsegment, which clocked an annual run rate of just $8.8 billion in the past quarter, belongs to a higher growth category.

Amazon and Microsoft

To be sure, Amazon’s and Microsoft’s cloud offerings dominate this high growth cloud category. In the global cloud infrastructure space, Amazon’s AWS is the largest platform. AWS is followed by Microsoft, whose commercial cloud revenues are generated by cloud offerings like Office 365, Dynamics 365, and Azure.

IBM’s comparable platform is Bluemix, which is a cloud foundry-based platform that enables developers to develop, deploy, and manage applications across the cloud space.

With cloud services including Watson, its AI (artificial intelligence) and blockchain-powered security solutions, IBM features among the top five players in the cloud space. But if it wants to move ahead and report revenue growth, its cloud offerings have to rapidly ramp up in scale to last in the fast-growing and competitive cloud space.

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