Ginni Rometty, IBM chair, president and CEO in Las Vegas, US. Picture: REUTERS/STEVE MARCUS
Ginni Rometty, IBM chair, president and CEO in Las Vegas, US. Picture: REUTERS/STEVE MARCUS

New York — IBM has reported revenue in the fourth quarter that beat analysts’ estimates, breaking a streak of five consecutive declines as its push into the hybrid cloud market slowly starts to bear fruit. The shares jumped in extended trading.

Sales were $21.8bn in the quarter, up almost 0.1% from the same period a year earlier, the company said in a statement late on Tuesday. Wall Street had forecast $21.6bn.

The increase stemmed from IBM’s acquisition of Red Hat, which it completed in the third quarter last year, helping boost the cloud and cognitive software division 8.7% from a year earlier. Total cloud revenue was $6.8bn, the highest ever.

CEO Ginni Rometty is hanging the company’s future on the market for hybrid cloud, which allows companies to store data in cloud servers on private and multiple public clouds run by its rivals Amazon Web Services and Microsoft’s Azure. IBM spent $34bn in 2018 to acquire Red Hat to help kick this strategy into gear. The company plans to use Red Hat to offer enhanced security services and applications in the hybrid cloud.

Red Hat contributed $1bn in revenue in the quarter ended December 31, but IBM was only allowed to recognise $573m of that due to US accounting standards. IBM reported earnings excluding some costs of $4.71 a share, beating the average analyst estimate of $4.69. The company said it expects adjusted earnings per share of at least $13.35 for 2020, ahead of Wall Street’s projections for $13.29.

Global technology services, which represents about 30% of IBM’s overall revenue, continued to decline. The technology consulting unit had revenue of $6.9bn, which is down 4.8% from the same period last year. Global business services also declined, to $4.2bn — a 0.6% drop from a year earlier.

Once the world leader in technology, IBM has lagged behind rivals for years after largely missing the cloud revolution. “The company has been struggling in a raging bull market for tech stocks,” said Ivan Feinseth, a director of research and analyst at Tigress Financial Partners. “All types of tech companies have been growing except for IBM.”

IBM has long struggled with revenue growth, a factor that has weighed on shares. The stock rose about 4% in extended trading following the report.