BM finally broke its 22-quarter streak of declining revenue, helped by updated hardware products, stronger growth in its newer business lines and favorable currency rates.

Sales in the fourth quarter increased 3.6 per cent to US$22.5 billion, compared with the average analyst estimate of US$22.06 billion. International Business Machines Corp. had forecast the growth in October. IBM said it took a one-time charge of US$5.5 billion as a result of the new U.S. tax law, which weighed on profit.

IBM’s new mainframe servers are playing a major role in boosting sales. Customers from banks to healthcare companies are buying the hardware and accompanying software for their own data centers to run large applications -- from financial transactions to customer billing. That should help keep pumping up revenue over the next couple of quarters, analysts said. But IBM will have to show that its bets on newer lines of business, like cloud computing and artificial intelligence, will help it keep growing even when the bump from hardware sales fades.

The signs from fourth quarter are positive: gains in what the company calls “strategic imperatives” -- those newer products and services in cloud, analytics, security and mobile -- accelerated from the prior period to 17 per cent, beating the expectations of a number of analysts who predicted that growth would slow in that area.

“Strategic imperatives need to maintain low double-digit growth rates,” BMO Capital Markets analyst Keith Bachman said in a note before the results. “If IBM’s strategic revenues reach 50 per cent of total revenues, we believe this will help mitigate revenue declines, and potentially allow for very modest revenue growth.” He rates the stock the equivalent of a hold. Sales from those areas now make up 46 per cent of IBM’s total revenue.

Earnings in the three months ending in December, excluding some items, were US$5.18 a share, compared with the average analyst estimate of US$5.17. IBM came one cent short of the average analyst expectation of US$13.81 a share for the full year. Under generally accepted accounting principles, IBM reported a loss for the quarter. The shares fell 3.1 per cent to US$163.90 in extended trading.

Over the last six years, Chief Executive Officer Ginni Rometty assured investors that she would refocus IBM’s business on emerging technologies -- such as cloud and artificial intelligence -- and stem the declines. She shed units, invested in cloud data centers and bought a number of companies to boost sales, bolster technology offerings and add troves of data to help train AI algorithms. But those investments have yet to pay off, and analysts have said that IBM’s turnaround is still in the works. 

The shares took a beating last year, after the company missed sales estimates in the first half. The stock then rallied the most since 2009 after the company forecast revenue would increase in the fourth quarter. Analysts have said that shows investors care most about getting back to sales growth. One quarter of expansion doesn’t a successful turnaround make, and it’s now critical for IBM to sustain improving revenue this year.

Rometty had set a goal for IBM to reach US$40 billion in strategic imperative revenue this year, which would mean those newer products would make up more than half of the company’s business