International Business Machines Corporation’s (IBM Quick QuoteIBM - Free Report) second-quarter results are likely to reflect healthy adoption of hybrid cloud, Watson, and blockchain platforms.

Additionally, the digital transformation wave has bolstered adoption of cloud-based QRadar, and Identity and Trust services, and CloudPak for Security offerings.

Synergies from Red Hat Buyout to Favor Cloud Business

Solid uptick in the company’s hybrid cloud computing capabilities, mobile, analytics, cognitive technologies and AI-related solutions is expected to get reflected in second-quarter revenues.

For the second quarter, the Zacks Consensus Estimate for Cloud & Cognitive Software segment’s revenues-external is pegged at $6.8 billion. IBM’s Cloud & Cognitive Software segment reported revenues of $5.7 billion in the year-ago quarter.

Particularly, synergies from the Red Hat acquisition are expected to have contributed to the Cloud & Cognitive Software segment’s revenues in the to-be-reported quarter.

Revenues from Red Hat in first-quarter 2021 increased 17% (up 15% at cc) on a normalized basis. Currently, more than 3,000 clients are using Red Hat and IBM’s hybrid cloud platform.

Management is optimistic about enhancing the utility of hybrid cloud services based on architecture built by IBM and Red Hat. During the to-be-reported quarter, IBM along with its subsidiary Red Hat teamed up with Cobuilder to create a platform — OpenBuilt — to facilitate enterprises in the construction domain to connect fragmented supply chains.

On Jun 3, IBM announced a collaboration with GK Software to help drive next generation retail underpinned by hybrid cloud technology from IBM and Red Hat. The companies will help retailers to innovate and adapt quickly to the digital era by offering consumers enhanced and connected omni-channel experiences.

Further, this Zacks Rank #3 (Hold) company’s cloud for financial services and cloud for telecommunications (launched in November 2020) are expected to have witnessed steady traction and likely to have contributed to second-quarter top-line numbers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, increasing expenses on enhancing cloud platform amid stiff competition from Microsoft (MSFT Quick QuoteMSFT - Free Report) Azure, Amazon’s (AMZN Quick QuoteAMZN - Free Report) Amazon Web Services and Oracle’s (ORCL Quick QuoteORCL - Free Report) Oracle Cloud remain headwinds.

Cloud Paks Strength to Aid GBS Segment

Robust pipelines across hybrid cloud and data platform, AI solutions, and in Cognitive Apps business, driven by strength in Cloud Paks and Security, cloud-based transformation services in the Global Business Services (GBS) segment, and App modernization offerings, might have favored second-quarter performance.

Acquisitions of 7Summits and Expertus in the first quarter are anticipated to have contributed to the segment’s performance in the to-be-reported quarter.

The Zacks Consensus Estimate for GBS segment’s revenues-external in the second quarter is pegged at $4.1 billion. In the second quarter of 2020, IBM’s GBS segment had reported revenues of $3.9 billion.

On May 5, IBM rolled out the latest Software as a Service (SaaS) version of IBM Cloud Pak for Security.  The latest version is aimed to help businesses easily deploy a zero trust architecture across entire operations.

Adoption of z15 to Boost Systems Segment

The company’s second-quarter results are likely to reflect gains from rapid uptake of IBM z15. Also, segmental revenues pertaining to cloud may favor soon-to-be-reported quarter’s results.

The Zacks Consensus Estimate for Systems segment’s revenues-external for the second quarter is pegged at $1.6 billion, indicating sequential growth of 14.3%.