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Will Software Revenue Growth Augment IBM's Q4 Earnings?
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International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, after the closing bell. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment backed by growing demand for its advanced AI-driven solutions and product innovation.
Factors at Play
The Software segment includes Hybrid Platform & Solutions comprising software services, Red Hat, automation and data & artificial intelligence (AI) businesses and Transaction Processing.
During the fourth quarter, IBM introduced the watsonx Code Assistant, which enables developers and IT operators to code more quickly and precisely with the assistance of generative AI. The usage of natural language ensures developers from various skill sets have access to automation across business operations.
IBM also unveiled watsonx.governance, aimed at enhancing the management and monitoring of AI models, whether generated from IBM or through other open-source communities. It enriches enterprises with necessary toolkits that automate AI governance processes, enabling corrective actions to mitigate risks and biases. Integration of this cutting-edge software will augment visibility and streamline the deployment of any mix of LLM models into business operations. These are likely to have supported the top line in the Software segment.
In the quarter under review, National Westminster Bank opted to leverage IBM's watsonx to enhance the capability of its virtual assistant, Cora. EY collaborated with IBM to develop EY.ai Workforce, a cutting-edge HR solution that optimizes enterprises’ HR processes with the assistance of AI. All these are likely to have been reflected in the upcoming results.
Key Developments in Q4
During the to-be-reported quarter, IBM signed a definitive agreement to acquire Software AG’s iPaaS (integration platform-as-a-service) businesses, StreamSets and webMethods. StreamSets and webMethods are industry leaders in data integration, API management and application integration. The buyout is anticipated to be concluded by the second quarter of 2024 through a €2.13 billion cash transaction.
webMethods specializes in advanced API management and integration tools and operates seamlessly across on-premises and cloud environments. On the other hand, StreamSets is a DataOps and data ingestion platform with a cloud-based architecture. By integrating these capabilities, IBM aims to create a comprehensive and advanced application and data integration platform within the industry. This integration will notably enhance watsonx’s data ingestion capabilities and also enrich customers with additional integration and API management features. Through this buyout, IBM is seeking to capitalize on the positive momentum of integration software market.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7,537.26 million, indicating growth from $7,288 million in the year-ago quarter. However, our estimate for revenues from Software is pegged at $6,936.1 million, suggesting a 4.8% decline year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $17,162 million. It generated revenues of $16,690 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.75 per share, indicating growth from $3.60 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively 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 -0.08%. 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 NVIDIA Corporation (NVDA - Free Report) is +3.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 28.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +1.46% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
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Will Software Revenue Growth Augment IBM's Q4 Earnings?
International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2023 results on Jan 24, after the closing bell. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment backed by growing demand for its advanced AI-driven solutions and product innovation.
Factors at Play
The Software segment includes Hybrid Platform & Solutions comprising software services, Red Hat, automation and data & artificial intelligence (AI) businesses and Transaction Processing.
During the fourth quarter, IBM introduced the watsonx Code Assistant, which enables developers and IT operators to code more quickly and precisely with the assistance of generative AI. The usage of natural language ensures developers from various skill sets have access to automation across business operations.
IBM also unveiled watsonx.governance, aimed at enhancing the management and monitoring of AI models, whether generated from IBM or through other open-source communities. It enriches enterprises with necessary toolkits that automate AI governance processes, enabling corrective actions to mitigate risks and biases. Integration of this cutting-edge software will augment visibility and streamline the deployment of any mix of LLM models into business operations. These are likely to have supported the top line in the Software segment.
In the quarter under review, National Westminster Bank opted to leverage IBM's watsonx to enhance the capability of its virtual assistant, Cora. EY collaborated with IBM to develop EY.ai Workforce, a cutting-edge HR solution that optimizes enterprises’ HR processes with the assistance of AI. All these are likely to have been reflected in the upcoming results.
Key Developments in Q4
During the to-be-reported quarter, IBM signed a definitive agreement to acquire Software AG’s iPaaS (integration platform-as-a-service) businesses, StreamSets and webMethods. StreamSets and webMethods are industry leaders in data integration, API management and application integration. The buyout is anticipated to be concluded by the second quarter of 2024 through a €2.13 billion cash transaction.
webMethods specializes in advanced API management and integration tools and operates seamlessly across on-premises and cloud environments. On the other hand, StreamSets is a DataOps and data ingestion platform with a cloud-based architecture. By integrating these capabilities, IBM aims to create a comprehensive and advanced application and data integration platform within the industry. This integration will notably enhance watsonx’s data ingestion capabilities and also enrich customers with additional integration and API management features. Through this buyout, IBM is seeking to capitalize on the positive momentum of integration software market.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7,537.26 million, indicating growth from $7,288 million in the year-ago quarter. However, our estimate for revenues from Software is pegged at $6,936.1 million, suggesting a 4.8% decline year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $17,162 million. It generated revenues of $16,690 million in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.75 per share, indicating growth from $3.60 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively 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 -0.08%. 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 #2.
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:
InterDigital, Inc. (IDCC - Free Report) is set to release quarterly numbers on Feb 15. It has an Earnings ESP of +1.93% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for NVIDIA Corporation (NVDA - Free Report) is +3.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb 28.
The Earnings ESP for Meta Platforms, Inc. (META - Free Report) is +1.46% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Feb 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.