Earnings

IBM thinks the 'the debate is over' on artificial intelligence — but this exchange says otherwise

Ginni Rometty, CEO of IBM
Lacy O'Toole | CNBC

IBM's chief financial officer, Martin Schroeter, made a bold statement on the future of technology on Thursday — and he got some pushback.

"The debate about whether artificial intelligence is real is over," Schroeter said, referring to IBM's cognitive computing platform, Watson. "And we're getting to work to solve real business problems."

Katy Huberty, managing director at Morgan Stanley, challenged IBM on the topic during Thursday's earnings conference call.

Huberty: "My other question is Watson: From the outside, it seems this business gets a pretty significant share of the press, but not contributing to revenue. Do you have visibility yet to when we can expect an inflection in revenue recognition from Watson? Or should we just not think about this as a contributing factor, or moving the needle in our models over the next couple of years?

Schroeter: "....Watson is a silver thread. It runs through the platform, it runs through Watson Health, it runs through Watson IoT, it's in security now....Watson will be part of that financial services solutions. So Watson is firmly, firmly established as the silver thread that runs through those cognitive solutions, and you can see all of that in the 'Cognitive Solutions' performance."

IBM's Cognitive Solutions segment hit revenue of $5.3 billion for the quarter, an increase of 1.4% from a year ago, although slightly less than the $5.38 billion expected by StreetAccount estimates.

That's better performance than the company at large, which saw its 19th straight quarter of declining year-over-year revenues -- revenue dropped about 1% from last year, to a total of $21.8 billion.

IBM has invested in artificial intelligence since the 1950s, when Arthur Samuel — widely considered father of machine learning — developed a checkers player that learned from experience. The company was one of the first to develop tools like "neural network learning" that are still buzzwords today.

Along the way, the company endured a "winter" of artificial intelligence, where impatient investors and skepticism froze research. Government reports focusing on the economic impact — rather than the scientific value — slashed funding for commercial AI projects during the 1970s and 1980s, University of Washington researchers wrote in a report.

"Before long the hype far exceeded AI's accomplishments," they wrote.

With companies like IBM, Google and Amazon all touting their artificial intelligence strength, things do indeed seem to be heating up. But on Wall Street, as Huberty's question indicated, there may still be a chill until the technology proves it can make money.