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Will Marginally Higher Revenues Buoy IBM's Q2 Earnings?
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International Business Machines Corporation (IBM - Free Report) is scheduled to report second-quarter 2023 results on Jul 19, after the closing bell. In the last reported quarter, the New York-based integrated systems provider beat the Zacks Consensus Estimate by 9 cents. The company is expected to have recorded marginally higher aggregate revenues year over year despite a challenging macroeconomic environment and softness in traditional businesses.
Factors at Play
During the second quarter, IBM launched single frame and rack mount configurations of IBM z16 and IBM LinuxONE Rockhopper 4 to enhance data centers’ productivity and support a dynamic IT ecosystem. With enhanced security capabilities, the single frame and rack mount configurations enable seamless deployment in new environments, significantly improving data center flexibility. This is likely to have driven the top-line growth in the Software segment.
During the quarter, IBM collaborated with Adobe to support brands with an enhanced content supply chain with next-generation AI capabilities. Integration of Adobe’s generative AI models with the in-depth technical expertise of IBM Consulting services, ranging from technological innovation, design and strategy, will help clients with a simplified generative AI landscape.
IBM also collaborated with the All-England Lawn Tennis Club to introduce generative AI tools in the Wimbledon Championship and bring new features for a premium digital experience for the viewers. The All-England Lawn Tennis Club is aiming to increase fan engagement and expand the tournament's global audience by utilizing advanced AI technology from IBM watsonx. These are likely to have generated incremental revenues in the Consulting segment.
However, escalating expenses toward cloud platform development amid intense competition in the cloud space are likely to have eroded its margins. In addition, the company is expected to have recorded adverse currency translation effects, likely hurting its bottom line.
The Zacks Consensus Estimate for total revenues for the company stands at $15,566 million. It generated revenues of $15,535 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.00 per share, indicating a decline from $2.31 in the year-earlier quarter.
Key Developments in Q2
During the to-be-reported quarter, IBM unveiled plans to develop its first quantum data center in Europe. The strategic investment is likely to help the company better serve its clients in an expanding quantum computing ecosystem in the continent. The facility is the second of its kind from the company after Poughkeepsie, NY. Located at IBM's facility in Ehningen, Germany, the data center is expected to be operational in 2024. Leveraging multiple IBM quantum computing systems, each equipped with quantum processors of more than 100 qubits, the facility is likely to cater to cloud-based quantum computing research and exploratory activity of users in diverse domains such as material science, high energy physics, energy transition, sustainability and financial applications. It is likely to help clients manage their European data regulation requirements while tapping its huge potential to solve some of the world's most challenging problems.
During the quarter, IBM inked a definitive agreement to acquire Apptio Inc., a prominent provider of financial and operational IT management and optimization software, for $4.6 billion. Apptio is a well-established, profitable leader in technology business management and FinOps, serving in excess of 1,500 clients, including more than half of the Fortune 100. The transaction, expected to close in the latter half of 2023, is likely to bolster IBM's IT automation capabilities, empowering enterprise leaders to generate incremental value across the technology domain. The acquisition reflects IBM's ongoing commitment to hybrid cloud and AI.
Earnings Whispers
Our proven model predicts 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 perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.58%, with the former pegged at $2.04 and the latter at $2.00. 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 other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +11.77% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +7.34% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 26.
Image: Bigstock
Will Marginally Higher Revenues Buoy IBM's Q2 Earnings?
International Business Machines Corporation (IBM - Free Report) is scheduled to report second-quarter 2023 results on Jul 19, after the closing bell. In the last reported quarter, the New York-based integrated systems provider beat the Zacks Consensus Estimate by 9 cents. The company is expected to have recorded marginally higher aggregate revenues year over year despite a challenging macroeconomic environment and softness in traditional businesses.
Factors at Play
During the second quarter, IBM launched single frame and rack mount configurations of IBM z16 and IBM LinuxONE Rockhopper 4 to enhance data centers’ productivity and support a dynamic IT ecosystem. With enhanced security capabilities, the single frame and rack mount configurations enable seamless deployment in new environments, significantly improving data center flexibility. This is likely to have driven the top-line growth in the Software segment.
During the quarter, IBM collaborated with Adobe to support brands with an enhanced content supply chain with next-generation AI capabilities. Integration of Adobe’s generative AI models with the in-depth technical expertise of IBM Consulting services, ranging from technological innovation, design and strategy, will help clients with a simplified generative AI landscape.
IBM also collaborated with the All-England Lawn Tennis Club to introduce generative AI tools in the Wimbledon Championship and bring new features for a premium digital experience for the viewers. The All-England Lawn Tennis Club is aiming to increase fan engagement and expand the tournament's global audience by utilizing advanced AI technology from IBM watsonx.
These are likely to have generated incremental revenues in the Consulting segment.
However, escalating expenses toward cloud platform development amid intense competition in the cloud space are likely to have eroded its margins. In addition, the company is expected to have recorded adverse currency translation effects, likely hurting its bottom line.
The Zacks Consensus Estimate for total revenues for the company stands at $15,566 million. It generated revenues of $15,535 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.00 per share, indicating a decline from $2.31 in the year-earlier quarter.
Key Developments in Q2
During the to-be-reported quarter, IBM unveiled plans to develop its first quantum data center in Europe. The strategic investment is likely to help the company better serve its clients in an expanding quantum computing ecosystem in the continent. The facility is the second of its kind from the company after Poughkeepsie, NY. Located at IBM's facility in Ehningen, Germany, the data center is expected to be operational in 2024. Leveraging multiple IBM quantum computing systems, each equipped with quantum processors of more than 100 qubits, the facility is likely to cater to cloud-based quantum computing research and exploratory activity of users in diverse domains such as material science, high energy physics, energy transition, sustainability and financial applications. It is likely to help clients manage their European data regulation requirements while tapping its huge potential to solve some of the world's most challenging problems.
During the quarter, IBM inked a definitive agreement to acquire Apptio Inc., a prominent provider of financial and operational IT management and optimization software, for $4.6 billion. Apptio is a well-established, profitable leader in technology business management and FinOps, serving in excess of 1,500 clients, including more than half of the Fortune 100. The transaction, expected to close in the latter half of 2023, is likely to bolster IBM's IT automation capabilities, empowering enterprise leaders to generate incremental value across the technology domain. The acquisition reflects IBM's ongoing commitment to hybrid cloud and AI.
Earnings Whispers
Our proven model predicts 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 perfectly the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.58%, with the former pegged at $2.04 and the latter at $2.00. 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.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season:
Intel Corporation (INTC - Free Report) is set to release quarterly numbers on Jul 27. It has an Earnings ESP of +21.05% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for T-Mobile US, Inc. (TMUS - Free Report) is +11.77% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 27.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +7.34% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Jul 26.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.