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IBM Cloud Integrates POWER9, Expands Hybrid Cloud Adoption

Zacks Equity Research

In a bid to provide clientele with flexible, reliable and secured cloud architecture,International Business Machines Corporation IBM has made IBM Power Systems Virtual Servers accessible via IBM Cloud.

Per the press release, IBM’s Power Systems Virtual Servers will provide a platform to assist AIX and IBM i workloads for public or private clouds or on premises in order to simplify business processes and expand operational efficiencies. IBM Cloud capabilities will aid the company to upscale business operations in North America.

IBM POWER9 processor-based Power Systems Virtual Servers are designed exclusively for compute-intensive AI workloads. The latest IBM Power Systems Virtual Servers solution is likely to accelerate business insights up to 2X. Customers will benefit significantly from this efficiency level, which will ultimately expedite their business transformation journey.

Increasingly, enterprises are striving to digitally transform their business methods by leveraging AI and finding ways to implement hybrid cloud strategies. This shift calls for an innovative hybrid cloud infrastructure, which dynamically keeps customers in sync with the trends. The company is leaving no stone unturned to constantly enhance their solutions, which provides better insight to business to carry on mission critical and data-oriented workloads in hybrid environment.

Per IDC, approximately 90% of enterprises are anticipated to adopt integrated hybrid cloud services, tools and strategies by 2024. The robust adoption of IBM’s hybrid cloud platforms, Watson services and other AI-driven offerings is expected to benefit the top line in the days ahead.

International Business Machines Corporation Price and Consensus


International Business Machines Corporation Price and Consensus


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IBM Cloud’s increasing adoption on the back of strength in company’s hosted private cloud offerings bodes well. In first-quarter fiscal 2019, IBM’s Cloud & Cognitive Software segment’s revenues-external improved 2% year over year (on cc basis) to $5 billion. Segmental revenues pertaining to Cloud increased 10%.

Moreover, the expanding customer base strengthens the company’s growth prospects in the digital transformation market, which per a MarketsandMarkets report, is envisioned to witness a CAGR of 18.1% to $665 billion by 2023 from $290 billion in 2018.

The continued robust adoption of IBM Cloud is expected to benefit IBM, going forward. According to latest third-quarter data from Synergy Research, IBM Cloud market share remained comparatively stable at approximately 7% on the back of strength in the company’s hosted private cloud offerings.

Further, per Synergy Research Group spending on cloud infrastructure services increased 42% year over year in the first quarter of 2019.

The aforementioned secular trends reinforce IBM’s growth prospects in the longer haul.

Our Take

Given the alluring capabilities offered by IBM's hybrid cloud infrastructure, the latest offering is likely to bolster the top line, consequently aiding IBM to better compete against peers. The company has been a pioneer when it comes to helping businesses digitally transform and evolve. The tech giant continues to bring innovation to its services to aid the enterprises leverage emerging technologies, including the likes of cloud, AI, IoT, among others.

However, rising competition from Amazon’s AMZN Amazon Web Services (AWS) and Microsoft Azure in the cloud infrastructure services market is a headwind.

Zacks Rank & Key Picks

IBM carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Match Group, Inc. MTCH and Autohome Inc. ATHM, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Match Group and Autohome have a long-term earnings growth rate of 15.2% and 20.9%, respectively.

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