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Can Modest Software Revenue Improvement Aid IBM's Q2 Earnings?
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Key Takeaways
IBM is expected to report higher Q2 software revenue, led by AI, cloud and product innovation.
New Red Hat services and OpenAI collaboration may strengthen IBM's cybersecurity and AI offerings.
ServiceNow, Lightedge and Wimbledon initiatives are likely to support IBM's segment revenue growth.
International Business Machines Corporation (IBM - Free Report) is scheduled to report second-quarter 2026 earnings after the closing bell on July 22. 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 the growing clout of watsonx.ai across various sectors.
Factors at Play
The Software segment includes Hybrid Cloud, Automation and Data and Transaction Processing.
During the second quarter, IBM launched two new managed services, Red Hat AI Inference and Red Hat OpenShift Virtualization Service on IBM Cloud. The new solutions are designed to support faster AI adoption while improving the security and efficiency of virtual workloads. IBM formed a collaboration with OpenAI during the quarter. The alliance focuses on taking AI capabilities beyond just improving productivity and efficiency and integrating AI directly into an organization’s cybersecurity operations. This will likely act as a catalyst for IBM’s project Lightwell, which aims to improve security across the open-source software ecosystem. IBM has committed $5 billion to this project. Such investment in innovation and strategic collaboration will likely boost IBM’s commercial prospects in the growing cybersecurity space and are likely to have generated incremental revenues for the Software segment.
In the to-be-reported quarter, IBM extended its partnership with Lightedge for a seamless integration of IBM Power Virtual Server (PowerVS) into the latter’s core hybrid cloud offering. This cloud-based infrastructure service will enable Lightedge to offer customers a wider array of hybrid cloud options for evolving workloads. The integration of PowerVS support has enabled Lightedge to eliminate the complexity organizations face when managing IBM Power environments across multiple providers and platforms. It offers customers a single, trusted partner capable of supporting every tier of a modern hybrid cloud strategy.
IBM strengthened its partnership with ServiceNow, Inc. through a long-term agreement to help businesses overcome fragmented data across enterprise systems and outdated legacy technology, the two major barriers to AI adoption. The deal enables IBM to provide customers with an open, secure and flexible platform for large-scale AI usage. Per the agreement, IBM will combine its advanced AI, automation and data management capabilities with ServiceNow’s AI platform to help enterprises deploy AI at scale. It helps organizations modernize existing systems, reduce costs and complexity and address the challenges of outdated infrastructure that limits flexibility and efficiency. These are likely to have generated higher segment revenues.
In the second quarter, IBM launched new AI-powered features for Wimbledon 2026 to improve the fan experience. Using its watsonx AI platform, IBM has enhanced the Wimbledon app and website to help fans enjoy matches in a more interactive and personalized way. IBM introduced Key Moments, an advanced feature designed to help fans better understand crucial moments during a tennis match. Using live and historical match data, the feature identifies key rallies, shots and turning points that influence momentum and a player’s chances of winning. By providing real-time insights and explanations, it makes the match easier and more exciting to watch. The company also upgraded Match Chat, an AI assistant that answers fan questions instantly using live match data, past statistics and AI insights, with some responses including photos and videos.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $8.04 billion, indicating an improvement from $7.39 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company stands at $17.59 billion. It generated revenues of $16.98 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.00 per share, indicating growth from $2.8 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM for the second 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:
Pinterest, Inc. (PINS - Free Report) is set to release quarterly numbers on Aug. 4. It has an Earnings ESP of +1.65% and carries a Zacks Rank #3.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.84% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug. 4.
The Earnings ESP for Silicon Motion Technology Corporation (SIMO - Free Report) is +7.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on July 29.
View the Zacks #1 Rank List
Image: Bigstock
Can Modest Software Revenue Improvement Aid IBM's Q2 Earnings?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) is scheduled to report second-quarter 2026 earnings after the closing bell on July 22. 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 the growing clout of watsonx.ai across various sectors.
Factors at Play
The Software segment includes Hybrid Cloud, Automation and Data and Transaction Processing.
During the second quarter, IBM launched two new managed services, Red Hat AI Inference and Red Hat OpenShift Virtualization Service on IBM Cloud. The new solutions are designed to support faster AI adoption while improving the security and efficiency of virtual workloads. IBM formed a collaboration with OpenAI during the quarter. The alliance focuses on taking AI capabilities beyond just improving productivity and efficiency and integrating AI directly into an organization’s cybersecurity operations. This will likely act as a catalyst for IBM’s project Lightwell, which aims to improve security across the open-source software ecosystem. IBM has committed $5 billion to this project. Such investment in innovation and strategic collaboration will likely boost IBM’s commercial prospects in the growing cybersecurity space and are likely to have generated incremental revenues for the Software segment.
In the to-be-reported quarter, IBM extended its partnership with Lightedge for a seamless integration of IBM Power Virtual Server (PowerVS) into the latter’s core hybrid cloud offering. This cloud-based infrastructure service will enable Lightedge to offer customers a wider array of hybrid cloud options for evolving workloads. The integration of PowerVS support has enabled Lightedge to eliminate the complexity organizations face when managing IBM Power environments across multiple providers and platforms. It offers customers a single, trusted partner capable of supporting every tier of a modern hybrid cloud strategy.
IBM strengthened its partnership with ServiceNow, Inc. through a long-term agreement to help businesses overcome fragmented data across enterprise systems and outdated legacy technology, the two major barriers to AI adoption. The deal enables IBM to provide customers with an open, secure and flexible platform for large-scale AI usage. Per the agreement, IBM will combine its advanced AI, automation and data management capabilities with ServiceNow’s AI platform to help enterprises deploy AI at scale. It helps organizations modernize existing systems, reduce costs and complexity and address the challenges of outdated infrastructure that limits flexibility and efficiency. These are likely to have generated higher segment revenues.
In the second quarter, IBM launched new AI-powered features for Wimbledon 2026 to improve the fan experience. Using its watsonx AI platform, IBM has enhanced the Wimbledon app and website to help fans enjoy matches in a more interactive and personalized way. IBM introduced Key Moments, an advanced feature designed to help fans better understand crucial moments during a tennis match. Using live and historical match data, the feature identifies key rallies, shots and turning points that influence momentum and a player’s chances of winning. By providing real-time insights and explanations, it makes the match easier and more exciting to watch. The company also upgraded Match Chat, an AI assistant that answers fan questions instantly using live match data, past statistics and AI insights, with some responses including photos and videos.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $8.04 billion, indicating an improvement from $7.39 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company stands at $17.59 billion. It generated revenues of $16.98 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $3.00 per share, indicating growth from $2.8 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM for the second 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 currently has an ESP of -0.76% 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:
Pinterest, Inc. (PINS - Free Report) is set to release quarterly numbers on Aug. 4. It has an Earnings ESP of +1.65% and carries a Zacks Rank #3.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +0.84% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Aug. 4.
The Earnings ESP for Silicon Motion Technology Corporation (SIMO - Free Report) is +7.68% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on July 29.