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IBM’s Technology Services & Cloud Platforms Segment Improves

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Aug. 13 2018, Updated 2:30 p.m. ET

Analyzing the segment’s performance

IBM’s (IBM) Technology Services & Cloud Platforms segment, which contributes ~43% of the company’s business, seems to be improving, driven by its infrastructure services. The segment has seen double-digit growth, fueled by enterprises’ growing demand for migrating their data to the cloud.

The Technology Services & Cloud Platforms segment comprises IBM’s global technology, infrastructure, and technical support services, as well as its integration software. In the last five quarters, the segment has grown 0.6% compounded annually, as shown in the graph below. In fiscal Q2 2018, its revenue rose 2.4% YoY (year-over-year) to $8.6 billion. However, in constant currency, its revenue was flat.

Key drivers

The infrastructure services sub-segment, which generates most of the segment’s revenue, grew 5.5% YoY in Q2 2018 to $5.8 billion, and 1% YoY in constant currency. The unit continues to benefit from ongoing digitalization trends.

IBM’s enterprise cloud has remained a key driver due to its security, AI, and blockchain features. As IBM was an early mover in the blockchain space, it has an advantage over other players such as Microsoft (MSFT), Oracle (ORCL), and Accenture (ACN).

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In the second quarter, the tech giant finished migrating Westpac’s core banking applications to the cloud. IBM has also decided to build 18 availability zones around the world for its cloud. IBM Cloud Private, which helps clients develop cloud-native applications behind their firewalls, added 100 new clients in Q2 2018.

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