IBM’s Answer To Growth Is Elementary

According to a MarketsandMarkets report, the global artificial intelligence (AI) market is estimated to grow at 53.65% annually from $419.7 million in 2014 to $5.05 billion by 2020. The growth in the industry is attributed to the deployment of AI technologies in retail, finance, and healthcare sectors.

IBM (NYSE: IBM) is targeting this high growth market with added focus on Watson through acquisitions and strategic tie-ups.

Photo Credit: Greg Gorman/Flickr.com

IBM’s Financials

IBM’s third quarter revenues were flat at $19.23 billion compared with $19 billion forecast by the market. Adjusted earnings of $3.29 per share were also better than the Street’s forecast of $3.23 for the quarter.

By segment, revenues from Cognitive Solutions grew 7% over the year to $4.24 billion. Global Business Services revenues fell 0.4% to $4.19 billion. Revenues from the Technology Services & Cloud Platforms grew 2% to $8.75 billion while Systems revenues reported the biggest decline at 21% to $1.56 billion. Global Financing revenues were down 8% to $412 million and revenues from other sources grew 35% to $81 million.

IBM continued to see impressive performance for its focus areas. Revenues from strategic imperatives business which includes the cloud, analytics, mobility and security business grew 16% over the year to $8.75 billion compared with $8.51 billion forecast by the market. Cloud revenues which includes public, private, and hybrid services grew 44% over the year. Cloud revenue over the trailing 12 months came in at $12.7 billion. The annual run rate for Cloud as-a-Service revenue grew 67% to $7.5 billion. Revenues from analytics increased 15% and revenues from mobile grew 19% over the year.

For the current year, IBM continued to forecast an EPS of at least $13.50 while analysts expect EPS of $13.51.

IBM’s Watson Focus

IBM continued to added focus on Watson across multiple industries. Within the healthcare segment, it entered into an agreement with Siemens last week to help hospitals better manage populations of patients. It signed a five-year agreement with Siemens Healthineers that will help providers meet the demand for value-based care analytics and reporting along with patient engagement. Population health management is seeing strong competition from analytics and software companies as well as health insurers. The industry involves a close integration between population management and health insurance industry so that payments to health care providers are shifted away from fee-for-service to reimbursement that is based on how well providers perform and the health outcomes achieved by patients.