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Will Higher Software Revenues Benefit IBM's Earnings in Q3?
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International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2024 earnings on Oct. 23. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment with a strong focus on product innovation and growing clout of watsonx.ai across various sectors.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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 reported quarter, IBM collaborated with Microsoft Corporation to strengthen cybersecurity operations. By integrating IBM's industry-leading cybersecurity services with Microsoft's comprehensive security technology portfolio, the companies aim to provide their clients with the tools and expertise needed to simplify and modernize their end-to-end security operations. The collaboration aims to streamline the cloud journey, optimize complex digital landscapes and reduce costs associated with running multiple identity tools.
In the third quarter, IBM completed the twin acquisitions of StreamSets and webMethods to augment its AI platform and automation capabilities. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts will offer clients an integrated product to facilitate seamless applications and services. This, in turn, will enable clients to effectively manage data quality within a distributed data landscape with real-time data streaming for a faster response and informed decision-making process.
In the quarter under review, IBM collaborated with the United States Tennis Association (“USTA”) to introduce advanced generative AI features for the US Open tournament. The collaboration aimed to offer comprehensive, informative coverage to ensure a more engaging experience for millions of global tennis fans. IBM redesigned its IBM Slamtracker experience, which is powered by IBM watsonx. The revamped platform delivered elaborated pre-match, live and post-match insights such as win possibilities, bulleted match previews and recaps and point-by-point analysis for all men's and women’s singles matches along with more expressive and contextual commentary.
In the quarter, the company unveiled the architecture of the upcoming IBM Telum II Processor and IBM Spyre. Designed to enhance processing capacity in next-generation IBM Z mainframe systems, these technologies will accelerate the use of traditional and large language AI models through an innovative ensemble AI method. This advancement addresses the growing need for power-efficient, secure and scalable solutions as generative AI projects with Large Language Models (LLMs) transition from proof-of-concept to production. By leveraging ensemble AI methods, clients can achieve faster and more accurate predictions. These are likely to have translated into incremental revenues in the Software segment.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $6.41 billion, indicating an improvement from $6.26 billion in the year-ago quarter. Our estimate for revenues from Software is pegged at $6.48 billion, suggesting a 9% rise year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $15.14 billion. It generated revenues of $14.75 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.27 per share, indicating growth from $2.20 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the third quarter. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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:
Corning Incorporated (GLW - Free Report) is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.08% and carries a Zacks Rank #3.
The Earnings ESP for Uber Technologies Inc. (UBER - Free Report) is +50.00% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct. 31.
The Earnings ESP for PayPal Holdings, Inc. (PYPL - Free Report) is +1.92% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct. 29.
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Will Higher Software Revenues Benefit IBM's Earnings in Q3?
International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2024 earnings on Oct. 23. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment with a strong focus on product innovation and growing clout of watsonx.ai across various sectors.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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 reported quarter, IBM collaborated with Microsoft Corporation to strengthen cybersecurity operations. By integrating IBM's industry-leading cybersecurity services with Microsoft's comprehensive security technology portfolio, the companies aim to provide their clients with the tools and expertise needed to simplify and modernize their end-to-end security operations. The collaboration aims to streamline the cloud journey, optimize complex digital landscapes and reduce costs associated with running multiple identity tools.
In the third quarter, IBM completed the twin acquisitions of StreamSets and webMethods to augment its AI platform and automation capabilities. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts will offer clients an integrated product to facilitate seamless applications and services. This, in turn, will enable clients to effectively manage data quality within a distributed data landscape with real-time data streaming for a faster response and informed decision-making process.
In the quarter under review, IBM collaborated with the United States Tennis Association (“USTA”) to introduce advanced generative AI features for the US Open tournament. The collaboration aimed to offer comprehensive, informative coverage to ensure a more engaging experience for millions of global tennis fans. IBM redesigned its IBM Slamtracker experience, which is powered by IBM watsonx. The revamped platform delivered elaborated pre-match, live and post-match insights such as win possibilities, bulleted match previews and recaps and point-by-point analysis for all men's and women’s singles matches along with more expressive and contextual commentary.
In the quarter, the company unveiled the architecture of the upcoming IBM Telum II Processor and IBM Spyre. Designed to enhance processing capacity in next-generation IBM Z mainframe systems, these technologies will accelerate the use of traditional and large language AI models through an innovative ensemble AI method. This advancement addresses the growing need for power-efficient, secure and scalable solutions as generative AI projects with Large Language Models (LLMs) transition from proof-of-concept to production. By leveraging ensemble AI methods, clients can achieve faster and more accurate predictions. These are likely to have translated into incremental revenues in the Software segment.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $6.41 billion, indicating an improvement from $6.26 billion in the year-ago quarter. Our estimate for revenues from Software is pegged at $6.48 billion, suggesting a 9% rise year over year.
The Zacks Consensus Estimate for total revenues for the company stands at $15.14 billion. It generated revenues of $14.75 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.27 per share, indicating growth from $2.20 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the third quarter. 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
IBM has an ESP of -2.43% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
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:
Corning Incorporated (GLW - Free Report) is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.08% and carries a Zacks Rank #3.
The Earnings ESP for Uber Technologies Inc. (UBER - Free Report) is +50.00% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct. 31.
The Earnings ESP for PayPal Holdings, Inc. (PYPL - Free Report) is +1.92% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct. 29.