IBM sales jump shows the mainframe is not dead, with hybrid cloud alive and well

At a time when most enterprises are planning cloud deployments and many are reportedly sharpening their mainframe exit strategy, IBM is seeing double-digit growth in its big iron business for the quarter ended September.

The company, which declared its third quarter results on Wednesday, reported a 98% jump in revenue for its z line of mainframe computer in terms of constant currency (that is, eliminating the effect of currency fluctuations).  

IBM, which buckets mainframes under its infrastructure line of business, released the z16 mainframe in April before beginning to sell it in the second quarter.

At launch, industry observers said they expected that the performance and scalability of the z16 would pave the way for more use of the mainframes in hybrid-cloud environments. And complementing the jump in mainframes sales, IBM revenue for its hybrid infrastructure business was also up last quarter.

For the quarter ended September, IBM’s infrastructure line of business—which includes hybrid infrastructure, distributed infrastructure, support and mainframes—reported a total revenue of $3.4 billion, up 23.1% year-on-year. Specifically, the company’s hybrid and distributed infrastructure business were up by 41% and 21% respectively.

Meanwhile, in another sign that the mainframe is still alive, Google, during its annual conference Cloud Next 2022 last week, claimed that a significant number of enterprises still run on mainframes when it launched a mainframe migration service, dubbed Dual Run.

Growth across all lines of business

IBM, which reported double-digit growth in the last two quarters, reported total revenue of $14.1 billion for the quarter, an increase of 15% year-on-year. Net income was $3.2 billion.

The company’s software business, which includes transaction processing services, enterprise Linux subsidiary Red Hat, automation, AI and security products and services, reported revenue of $5.8 billion, up 14.2% year-on-year.

Specifically, transaction processing revenue was up by 33%, followed by Red Hat, which showed an 18% increase in revenue year-on-year.

Security products revenue was up by 6%, followed by AI and automation, which showed a revenue increase of 4% and 3% respectively.

In the consulting line of business, which includes business transformation, technology consulting and application operations, IBM reported a total revenue of $4.7 billion, an increase of 14% year-on-year.

While application operations and technology consulting revenue both saw an increase of 17%, business transformation revenue grew by 14%. 

So far in 2022, the company has completed seven acquisitions.

“In terms of uses of cash in the first three quarters, we invested over $1 billion in acquisitions, which was more than offset by proceeds from divested businesses,” said James Kavanaugh, IBM CFO, in the company’s earnings call with analysts, according to a Seeking Alpha transcript.