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Can a Steady Software Revenue Stream Drive IBM Q3 Earnings?
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International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2022 results on Oct 19, after the closing bell. In the third quarter, the company is likely to have recorded healthy revenues from the Software segment due to increased adoption of its cloud services.
Factors at Play
The Software segment includes Hybrid Platform & Solutions comprising software services, Red Hat, automation and data & AI businesses and Transaction Processing.
During the third quarter, IBM collaborated with VMware, Inc. to assist global clients and partners in improving mission-critical workloads alongside accelerating time-to-value in hybrid cloud environments. It will help clients improve their hybrid cloud journeys and business transformations by being Global Systems Integrator for VMware. As a result, clients running applications across more than one cloud will obtain assistance regarding security, management and reliability in such situations. These are likely to have driven the top-line growth in the Software segment.
The company inked an agreement during the quarter with Saudi Data and Artificial Intelligence Authority to drive the adoption of artificial intelligence (AI) across industrial domains throughout the Kingdom of Saudi Arabia. IBM will work in unison with the firm to identify high-value applications of AI and machine learning within public and private sector organizations to support the various sustainability and industrialization objectives of the country.
Key Developments in Q3
During third-quarter 2022, IBM acquired Databand.ai, a leading provider of data observability software that helps organizations fix issues with their data, including errors, pipeline failures and poor quality, before their bottom line is affected. The transaction boosts IBM's software portfolio across data, AI and automation and enables it to address the full spectrum of observability across IT operations. The acquisition will help unlock more resources for Databand.ai to expand its observability capabilities for broader integrations across open-source and commercial solutions.
Overall Expectations
The Zacks Consensus Estimate for revenues from Software is pegged at $5,696 million.
The Zacks Consensus Estimate for total revenues for the company stands at $13,749 million. Our revenue estimate for the quarter is pegged at $14,159 million. It generated restated revenues of $13,251 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.78 per share, indicating a decline from the restated tally of $1.84 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -6.39%, with the former pegged at $1.67 and the latter at $1.78. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Business Machines Corporation Price and EPS Surprise
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
The Earnings ESP for Verizon Communications Inc. (VZ - Free Report) is +0.26% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Oct 21.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +8.18% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 27.
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Can a Steady Software Revenue Stream Drive IBM Q3 Earnings?
International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2022 results on Oct 19, after the closing bell. In the third quarter, the company is likely to have recorded healthy revenues from the Software segment due to increased adoption of its cloud services.
Factors at Play
The Software segment includes Hybrid Platform & Solutions comprising software services, Red Hat, automation and data & AI businesses and Transaction Processing.
During the third quarter, IBM collaborated with VMware, Inc. to assist global clients and partners in improving mission-critical workloads alongside accelerating time-to-value in hybrid cloud environments. It will help clients improve their hybrid cloud journeys and business transformations by being Global Systems Integrator for VMware. As a result, clients running applications across more than one cloud will obtain assistance regarding security, management and reliability in such situations. These are likely to have driven the top-line growth in the Software segment.
The company inked an agreement during the quarter with Saudi Data and Artificial Intelligence Authority to drive the adoption of artificial intelligence (AI) across industrial domains throughout the Kingdom of Saudi Arabia. IBM will work in unison with the firm to identify high-value applications of AI and machine learning within public and private sector organizations to support the various sustainability and industrialization objectives of the country.
Key Developments in Q3
During third-quarter 2022, IBM acquired Databand.ai, a leading provider of data observability software that helps organizations fix issues with their data, including errors, pipeline failures and poor quality, before their bottom line is affected. The transaction boosts IBM's software portfolio across data, AI and automation and enables it to address the full spectrum of observability across IT operations. The acquisition will help unlock more resources for Databand.ai to expand its observability capabilities for broader integrations across open-source and commercial solutions.
Overall Expectations
The Zacks Consensus Estimate for revenues from Software is pegged at $5,696 million.
The Zacks Consensus Estimate for total revenues for the company stands at $13,749 million. Our revenue estimate for the quarter is pegged at $14,159 million. It generated restated revenues of $13,251 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.78 per share, indicating a decline from the restated tally of $1.84 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -6.39%, with the former pegged at $1.67 and the latter at $1.78. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
Zacks Rank: IBM currently has a Zacks Rank #3.
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
AT&T Inc. (T - Free Report) is set to release quarterly numbers on Oct 20. It has an Earnings ESP of +2.70% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Verizon Communications Inc. (VZ - Free Report) is +0.26% and it carries a Zacks Rank of 3. The company is set to report quarterly numbers on Oct 21.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +8.18% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 27.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.