Wired Senior Staff Writer Cade Metz and Arvind Krishna, IBM CEO and then Senior Vice President and Director at IBM Research, will speak on stage at the Wired Business Conference in New York on June 16, 2016.

Brian Oh | Wired | Getty Images

IBM shares rose up to 4% in expanded trading on Monday after the enterprise technology and services provider announced second-quarter earnings that were stronger than analysts had expected.

This is how the company did it:

  • Merits: $ 2.33 per share, adjusted, down from $ 2.29 per share analyst expects, Refinitiv said.
  • Revenue: $ 18.75 billion versus $ 18.29 billion as analysts expected, Refinitiv said.

Revenue rose 3% year over year in the quarter, the fastest growth in three years, according to a statement as the company left a quarter in which the coronavirus had a significant impact. In the previous quarter, sales had increased by 0.9%. The company reiterated its expectation that full-year sales will increase rather than decrease.

“The overall spending environment continues to improve,” said CEO Arvind Krishna in a conference call with analysts. “As economies reopen in many parts of the world, many markets and industries are getting back on track. We are seeing this in North America and in select industries.”

IBM’s Global Technology Services segment, which includes managed services, outsourcing and support, had sales of $ 6.34 billion. That was up slightly and was above the consensus of $ 6.23 billion among analysts surveyed by FactSet. IBM continues to expect to outsource the Managed Infrastructure Services component of Global Technology Services under the name Kyndryl by the end of the year.

“While our performance remains strong with existing customers, sales cycles are lengthened for new Logo customers as they wait for more information about Kyndryl,” said Jim Kavanaugh, IBM’s chief financial officer.

The Cloud & Cognitive Software business, which also includes Red Hat, contributed $ 6.10 billion to revenue, up 6% and more than the FactSet consensus of $ 5.93 billion.

The company’s Global Business Services advisory unit had sales of $ 4.34 billion, growth of nearly 12% and more than the FactSet consensus of $ 4.03 billion.

“Customers are accelerating their pace and speed of digital transformation using the cloud and AI to drive operational insights, increase productivity and create new growth opportunities,” said Kavanaugh. The company has invested in building capabilities for competing cloud providers like Amazon Web Services and Microsoft Azure, he said.

System revenue, including hardware, was $ 1.71 billion, down 7% and in line with consensus.

IBM spent $ 1.75 billion on acquisitions in the quarter, most of it in a single quarter since Red Hat closed its $ 34 billion deal in Q3 2019. It said process mining software company myInvenio , application management company Turbonomic, and Salesforce consultancy Waeg. The company also announced 2-nanometer chip technology and new artificial intelligence capabilities for its Watson Studio model-building software.

Excluding the after-hours movement, IBM stock is up 9% year-to-date, while the S&P 500 index is up nearly 13% over the same period.

CLOCK: IBM CEO to CNBC: Paul Cormier, who heads Red Hat, remains