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How IBM’s Cognitive Solutions Performed in 3Q17

Anne Shields - Author

Nov. 22 2017, Updated 9:01 a.m. ET

Cognitive solutions growth in 3Q17

Earlier in this series, we discussed IBM’s (IBM) recently announced 3Q17 results. However, IBM’s Strategic Imperatives segment continued to post growth, as has been the case since the segment began operations. Now let’s look at IBM’s Cognitive Solutions segment’s performance, which consists of solutions software and transaction processing software. IBM’s Watson Health, IoT (Internet of Things), and other cloud computing offerings fall under this segment.

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The segment’s revenues rose 3% to $4.4 billion in fiscal 2Q16 and contributed approximately 23% towards overall revenues. Annuity content, which makes up the majority of IBM’s Cognitive Solutions, continued to grow on the back of 3% growth in solutions software. Within this segment, strategic imperatives and cloud revenue rose 5% and 10%, respectively.

IBM’s initiatives in the AI space

IBM continued to emphasize cognitive solutions. Citing Schroeter, IBM’s CFO, Bloomberg wrote, “Cognitive solutions has attracted a lot of our investment, and when we look at underlying performance, it captures and reflects a lot of the new strategic imperative areas we’re going into.” He added, “We saw pretty broad-based growth across all cognitive solutions elements.”

Watson is IBM’s AI (artificial intelligence) and cognitive computing software. With a presence in various sectors from healthcare to financial services to blockchain, Watson continued to be a key highlight in 3Q17 earnings. IBM outlined Watson’s role in analytics, security, client support, and the AI space.

In a bid to raise awareness about Watson’s capabilities as well as its position in the AI space, IBM let organizations have free access to Watson’s basic functions this month. Morgan Stanley (MS) considers Microsoft (MSFT), Amazon (AMZN), and IBM underappreciated leaders in the AI space with market shares between 20%–30%. With Microsoft and Amazon eying the AI market, IBM doesn’t have much choice than to speed up its initiatives in this rapidly growing space. However, despite billion-dollar investments in Watson, it doesn’t seem to have yielded satisfactory results yet.


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