IBM's dwindling revenue finds a reprieve in software sales, declining by 3% overall
IBM's Software Segment Shines in Q2 2021
IBM's software business continued to be a significant driver of growth in the second quarter of 2021, accounting for a substantial portion of the company's Application Infrastructure and Middleware (AIM) revenue. According to available data, these segments generated approximately $2.6 billion of IBM's total AIM revenue of $6.3 billion.
The software division was the only segment to experience growth in IBM's most recent financial quarter, with software sales rising by 4% to $6.4 billion. IBM's emphasis on hybrid cloud and AI platforms, such as Red Hat Enterprise Linux, contributed to this growth.
IBM's leadership in the AIM market is well-established, with the company holding the top spot in business process management suites (BPMSs), enterprise service bus (ESB), B2B middleware software, message-oriented middleware (MOM), and transaction processing monitors.
While exact growth rates for IBM's AIM software in Q2 2021 are not available, the company's software segment has historically grown by mid to high single digits or slightly higher. IBM's AIM software typically falls under the broader software and middleware categories within their hybrid cloud strategy.
In the broader context, IBM's overall revenues dropped by 3% year-on-year during the three month period ending June 30, down to $24.9 billion. The company's services unit shrank by 4%, while the services backlog growth for the year was 7%, the best positioning in four years.
IBM's hardware business, however, continues to face challenges, with hardware sales plummeting by 12% to $3.8 billion. The company incurred a $1 billion charge related to a "restructuring" program, which likely includes redundancies, pulling its net income down 17% to $3.2 billion.
Despite these challenges, IBM remains ahead of Oracle in the AIM market, with Oracle holding 16% of the market share. IBM's market dominance is attributed to the breadth of its middleware portfolio, which includes products like WebSphere, Tivoli, and information management.
Looking ahead, IBM's CEO, Arvind Krishna, expressed confidence in the prospects for IBM's software and service units in the second half of the year. Gartner also attributes IBM's market dominance to its extensive middleware portfolio.
In light of IBM's Q2 2021 financial results, the growth in the software segment can be partly attributed to technology advancements in hybrid cloud and AI platforms. Despite a decline in overall company revenues, IBM's software business, which includes offerings like WebSphere, Tivoli, and information management, outperformed the services and hardware units, making it a crucial element in business strategy.
