Post by : Badri Ariffin

IBM’s latest earnings reveal a mixed picture for the tech giant, as slower growth in its key cloud software segment dampens investor enthusiasm, even as AI-powered mainframes push revenue past expectations.

The company reported third-quarter revenue of $16.33 billion, exceeding analysts’ estimates of $16.09 billion. Yet, shares fell 5% in extended trading on Wall Street, reflecting investor concerns over decelerating growth in the hybrid cloud unit, Red Hat. Growth in this segment slowed to 14%, down from 16% in the previous quarter, signaling a potential plateau in what has been a high-margin business.

Despite this, IBM’s infrastructure segment, home to its AI-focused mainframes, posted a 17% revenue increase to $3.56 billion. The new mainframe, featuring AI-optimized chips, has gained traction in the financial sector, allowing companies to adhere to strict data security and residency rules while exploring artificial intelligence applications.

IBM’s AI-driven business also saw a strong jump, reaching $9.5 billion, up $2 billion from the second quarter, demonstrating growing enterprise adoption of AI solutions.

Looking ahead, CEO Arvind Krishna expects the hybrid cloud unit to return to mid-teen growth levels in 2026, while IBM raised its overall revenue forecast for the fiscal year, now anticipating growth above 5% at constant currency.

While the slowdown in cloud growth raises questions about long-term momentum in one of IBM’s strategic pillars, the company’s AI and mainframe initiatives show that it remains a formidable player in high-value enterprise technology markets.

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