After 22 straight quarters or nearly six years of revenue decline, IBM (NYSE: IBM) has finally managed to break this streak. 

IBM’s Financials

Revenues for the fourth quarter grew 4% to $22.5 billion, beating analyst estimates of $22.06 billion. Non GAAP EPS of $5.18 was also better than the Street’s estimate of $5.17. However, a one-time charge of $5.5 billion due to the recent US tax reforms resulted in a net loss of $1.1 billion, down 123% from net income of $4.5 billion a year ago. Adjusted gross margins of 49.5% missed market expectations of 50.8%.

For the full fiscal year 2017, IBM reported revenue of $79.1 billion, down 1% and net income of $5.8 billion or $6.14 per share, down 52%. Non GAAP EPS was $13.8, slightly less than analyst estimate of $13.9.

By segment, fourth quarter revenue from Cognitive Solutions including Watson Health and Watson Financial Services increased 3% to $5.4 billion. Global Business Services revenue was up 1% to $4.2 billion. Technology Services & Cloud Platforms revenue fell 1% to $9.2 billion and Systems revenue was up 32% to $3.3 billion. Global Financing revenue was up 1% to $450 million.

Strategic Initiatives revenue for the fourth quarter was $11.1 billion, accounting for 49% of total revenue. Revenue from cloud grew 30% to $5.5 billion, analytics grew 9%, mobile grew 23%, and security grew an impressive 132%.

This impressive performance was led by the strong demand for its pervasive encryption in IBM Z. The company also had saw good performance in managed security services within its GTS business and security software.

IBM ended the fourth quarter of 2017 with $12.6 billion of cash on hand. Debt totalled $46.8 billion, including Global Financing debt of $31.4 billion. IBM’s free cash flow was $6.8 billion. IBM returned $1.4 billion in dividends and $0.7 billion of gross share repurchases to shareholders. At the end of December 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.

For the full fiscal year 2018, IBM expects EPS of at least $13.80 versus analyst estimate of $13.92. It expects the momentum in the second half of the year to result in revenue growth for the first quarter.

IBM’s Push into Emerging Tech

During the third quarter, IBM invested about $240 to create the MIT-Watson AI Lab in a 10-year research partnership with MIT. Over 100 researchers from both organizations will collaborate to work on four key focus areas: AI Algorithms, the Physics of AI, the Application of AI to industries, and Advancing shared prosperity through AI.

IBM also launched the Q Network, a collaboration of leading Fortune 500 companies, academic institutions, and national research labs. They can access IBM Q systems through the IBM Cloud to explore practical applications for advance quantum computing.

For 25 straight years now, IBM leads the US in patents in 2017. It has over 9,000 patents, with nearly half of them for advancements in AI, cloud computing, cyber security, blockchain, and quantum computing.

It released the IBM Blockchain platform in the third quarter and has collaborated on 35 active networks with clients such as CLS, Everledger, KBank, London Stock Exchange, and Mizuho across cross-border payments and financial services, supply chains in retail, valuable goods authentication in industrials, and digital identification for governments.

During the fourth quarter, IBM extended its food safety initiative with Walmart into China. It also announced its joint venture with Maersk to provide more efficient, secure global trade using blockchain technology.

Things seem to be on the mend at IBM. The strong performance in the quarter was driven by the demand for the new IBM z14 mainframe. It was the first full quarter for the product. However, it remains to be seen if IBM will be able to sustain the momentum. What will certainly help are some acquisitions: it made just three acquisitions in 2017. Hopefully, 2018 will see some impactful acquisitions from IBM.

Its stock is trading at $162.37 with a market capitalization of $150.32 billion. It touched a 52-week high of $182.79 in February last year. It had fallen to a 52-week low of $139.13 in August last year.

(Click on image to enlarge)