Compared with many of its recent earnings reports, IBM's (IBM) - Get Reportsecond-quarter report isn't too bad. Both sales and EPS beat expectations, and full-year adjusted EPS and free cash flow guidance was affirmed. Moreover, unlike in some prior quarters, the EPS beat wasn't driven by massive stock buybacks or an unexpected tax benefit -- a moderate $800 million was spent on buybacks, and IBM's tax rate, though still fairly low at 17.8%, was up from 16.5% a year ago.

Rather, the beat was fueled by software and services sales improvements. IBM's high-margin Cognitive Solutions unit, which covers a variety of enterprise software, saw revenue rise 3.5% annually to $4.7 billion, a reversal from the first quarter's 1.7% decline. Global Business Services revenue fell 2% to $4.3 billion, a smaller drop than the first quarter's 4.3%. And Tech Services & Cloud Platform revenue fell 0.5% to $8.9 billion, after having dropped 1.5% in the first quarter.

A 49% increase in the annual run rate for "cloud-as-a-service" revenue to $6.7 billion boosted services sales. Software benefited from a 43% increase in mobile revenue (boosted by IBM's iOS-related partnership with Apple) and an 18% increase in security revenue. IBM's massive analytics business saw a 5% sales increase.

But it's worth noting acquisitions contributed to sales improvements, particularly in software and cloud services. IBM has announced nearly two dozen acquisitions since the start of 2015 -- major deals include the $2.6 billion purchase of healthcare data/analytics services firm Truven Health Analytics; the $1 billion purchase of healthcare imaging software firm Merge Healthcare; the $1.3 billion purchase of storage hardware/software firm Cleversafe; and the acquisition of the Weather Co.'s digital assets, reportedly for over $2 billion.

And in spite of the acquisitions, total revenue was down 3% annually, thanks to a 23.2% drop in Systems (hardware) division revenue to $2 billion and an 11.3% drop in Global Financing revenue to $424 million. Hardware sales were hurt by the fact IBM's current mainframe upgrade cycle is at a late stage, but cloud infrastructure adoption and server share losses also appear to be weighing.

Also: In a story that Microsoft, Oracle and others can certainly relate to, it looks as if the shift in IBM's sales mix from on-premise software and services revenue to cloud apps and services is weighing on margins: Adjusted gross margin fell to 49% from 50.9% a year ago. That, along with a higher tax rate and acquisition-related spending increases, contributed to a 25% drop in adjusted net income to $2.8 billion.

As of the time of this article, IBM is up just fractionally in after-hours trading in spite of its second-quarter beat. Big Blue's acquisition spree and internal R&D investments are helping put an end to the major revenue declines it saw during much of 2015. But the sales pressures faced by its traditional enterprise businesses remain severe as cloud adoption continues. And the company clearly has more work to do in improving cloud margins.