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IBM’s Revenue Continues Its Slide and Watson Can’t Figure Out How to Stop It

IBM’s quarterly revenue missed analysts’ estimates as growth slowed in its higher-margin businesses that include cloud and artificial intelligence services, while demand for its legacy technology services fell.

Shares of the Dow component were down 2% at $150.78 in after-market trading on Tuesday.

Armonk, New York-based IBM has in recent years shifted focus to pockets of growth across its business—areas such as cloud, cybersecurity and data analytics—to counter a slowdown in its hardware and software businesses.

Revenue from these initiatives, which IBM (IBM) calls “strategic imperatives,” rose 5% in the second quarter ended June 30. But the growth was slower than the double-digit percentage increases that the businesses had posted in the past several quarters, which could add to concerns about the pace of IBM’s turnaround.

 

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However, revenue from “strategic imperatives” rose 11% to $34.1 billion over the past 12 months, the company said.

Revenue in IBM’s technology services and cloud platforms business—its largest—fell 5.1% to $8.41 billion. Analysts on average had expected $8.58 billion, according to financial data and analytics firm FactSet.

Total revenue dipped 4.7% to $19.29 billion, marking the steepest fall in in five quarters. IBM has not posted growth in annual revenue since 2011.

Analysts on average had expected revenue of $19.46 billion, according to Thomson Reuters I/B/E/S.

IBM’s net income fell to $2.33 billion, or $2.48 per share in the second quarter ended June 30, from $2.50 billion, or $2.61 per share, a year earlier.

Excluding one-time items, IBM earned $2.79 per share, according to Thomson Reuters I/B/E/S, beating analysts’ estimates of $2.74.