IBM sales rose 3.4% to $18.7 billion for the second quarter ending June 30, the Armonk, New York-based company said today. Net income fell 2.6% to $1.33 billion.

Total cloud revenue in the quarter of $7 billion, up 13% led by Cloud & Cognitive Software cloud revenue up 29%, Global Business Services cloud revenue up 35%, and Red Hat revenue up 20%. Total cloud revenue over the last 12 months of $27.0 billion, is up 15%.

The company's systems revenues were $1.7 billion, down 7.3%, driven by declines in IBM Z down 11%; and Storage Systems down 7%. Power systems declined 2%. Cloud revenue down 16%.

“In the second quarter client adoption of our hybrid cloud platform contributed to strong performance in Global Business Services and software and drove improved overall revenue growth. At the same time, we continued to help clients infuse our AI-based technology offerings into their core business workflows," said Arvind Krishna, IBM chairman, and chief executive officer. "We are pleased with our progress and we remain on track to deliver full-year revenue growth and meet our cash flow objective.”

“We expanded operating margins and grew profit dollars in the quarter, providing a key contribution to our cash performance," said James Kavanaugh, IBM senior vice president, and chief financial officer. "In the first half of the year we increased adjusted free cash flow, invested in strategic acquisitions to strengthen our hybrid cloud and AI capabilities, continued to deleverage and, consistent with our commitment, again increased our dividend.”