What happened

Shares of IBM (NYSE:IBM) soared in Wednesday's morning session, rising 9.7% as of 11:20 a.m., Eastern time. Big Blue reported third-quarter results Tuesday night, exceeding analyst expectations and showing signs that its long-running strategy shift is starting to pay off in the second half of 2017.

So what

IBM's third-quarter results were flat year over year, as adjusted earnings stayed at $3.30 per share and revenues were unmoved at $19.2 billion. Analysts would have settled for earnings of $3.28 per share and sales near $18.6 billion, so Big Blue beat the Street's revenue targets by a wide margin. Full-year guidance targets were reiterated, and CFO Martin Schroeter shared a positive view of IBM's strategic makeover progress:

"Ninety days ago, I talked about planting the flag to mark the beginning of an improvement of the trajectory of our business, which would result in a second half that was improved over the first," Schroeter said. "Now in the third quarter, we've improved our year-to-year revenue and margin trajectory."

IBM's classic logo, blue stripes on white background.

Image source: IBM.

Now what

IBM's strong results rested on 11% growth among the so-called strategic imperatives, led by 20% higher cloud computing sales. The Z System line of mainframe servers presented a new product generation two weeks before the end of the quarter, sparking a 62% year-over-year boost to mainframe sales.

This mixture of new and old business drivers -- with the caveat that IBM's 14th-generation mainframes come with forward-looking features such as forced data encryption and blockchain computing support -- is paving the way toward modest year-over-year earnings growth for the first time since the second quarter of 2014.

Following this morning's jump, IBM shares are trading 4% lower year to date and can be bought for the bargain-bin ratio of 11.7 times trailing earnings. As an IBM owner myself, I see plenty of room for further gains as the strategic imperatives continue taking charge of Big Blue's overall operations.

Anders Bylund owns shares of IBM. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.