IBM Corp. (IBM) - Get Report provided the first report in the battle for the cloud computing market on Tuesday, with results from Amazon.com Inc. (AMZN) - Get Report , Microsoft Corp. (MSFT) - Get Report  and Alphabet Inc.'s (GOOGL) - Get Report Google Cloud Platform coming later in the month. 

While IBM's cloud business is growing, it is not offsetting declines in its legacy business and is not matching the rapid expansion of its peers.

Shares of IBM dropped 4.4% to $147.28 per share early Wednesday afternoon, after the company reported its 21st consecutive quarter of year-over-year revenue declines following Tuesday's close.

Sales for IBM's technology services and cloud unit declined 5.1% to $8.4 billion, missing Wall Street's expected forecasts of $8.6 billion. Cloud revenues increased 17%, adjusted for currency, to $3.9 billion. However, cloud growth decelerated from a 35% year-over-year gain in the first quarter.

"It was decent, it was not a complete disappointment," said Andrew Yange of Morningstar Inc. of IBM's cloud numbers. "One of the big things for us is the relative performance." For instance, Wall Street expects Amazon Web Services to show 41% growth in the second quarter. 

One catch for IBM and other legacy software companies is that cloud sales may cannibalize their sales of traditional software licenses.

IBM has the greatest exposure to software license renewals, according to Wedbush Securities. In a survey of 104 enterprise software buyers at U.S. corporations that the firm conducted at the end of 2016, 41.3% of respondents said that IBM had the greatest number of contract renewals.

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"You can take an existing legacy contract and convert to cloud-based environment and say cloud is up 50%," said Wedbush analyst Moshe Katri. "You don't know if that 50% growth is coming in from the existing legacy business that is being converted [to the cloud] or ... from incremental new logos or new clients."

Moreover, IBM groups software-as-a-service applications (Saas) in with its sales of cloud infrastructure-as-a-service and cloud platform-as-a-service sales. Its public cloud computing growth would not be as robust with software sales stripped out. 

"When you add the Saas, or the software component, it may be a little more flattering for IBM," Morningstar's Yange said.

While cloud and other strategic investments for IBM are growing, IBM's turnaround remains a work in progress. Yange suggests it will take 18 to 24 months before the company returns to revenue growth in the low single digits.

"We definitely don't expect any return to heroic growth for this company in the foreseeable future," Yange said.

The next big pieces of cloud data comes when Microsoft reports earnings on July 20, with Google announcing results on July 24 and cloud king Amazon on July 27.