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IBM Gears Up to Report Q2 Earnings: What's in the Offing?

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International Business Machines Corporation IBM is slated to report second-quarter 2021 results on Jul 19.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.25 per share, which indicates growth of 3.2% from the prior-year quarter’s levels.

For quarterly sales, the consensus mark is pegged at $18.2 billion that suggests a marginal improvement of 0.6% from the year-ago quarter’s reported figure.

The company has a trailing four-quarter earnings surprise of 6.33%, on average.

International Business Machines Corporation Price and EPS Surprise

International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation Price and EPS Surprise

International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote

Factors to Note

IBM’s second-quarter results are likely to reflect gains from steady adoption of its hybrid cloud computing capabilities, mobile, analytics, cognitive technologies and AI-related solutions.

Synergies from the Red Hat acquisition are expected to have contributed to the cloud segment’s revenues in the to-be-reported quarter. Revenues from Red Hat in the first quarter increased 17% (up 15% at cc) on a normalized basis, driven by strong uptake of Red Hat Enterprise Linux and OpenShift platform.

More than 3,000 clients including the likes of Barclays and Walmart are using Red Hat and IBM’s hybrid cloud platform, presently.

Its new company, Kyndryl is expected to have facilitated digital transformation of clients and is a testament to IBM’s efforts to accelerate its hybrid cloud growth strategy.

Moreover, IBM, currently carrying a Zacks Rank #3 (Hold), has been striving to enhance efficiency of its blockchain solutions, and quantum computing systems and services. In this respect, growing clientele of IBM Q Network has been a positive. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, escalating expenses directed toward cloud platform development amid intense competition in the cloud space from the likes of Amazon’s AMZN Amazon Web Services, Microsoft’s MSFT Azure platform and Alphabet’s GOOGL Google Cloud has been a headwind.

Key Developments in Q2

During the second quarter, IBM acquired Italy-based myInvenio for an undisclosed amount. The acquisition of myInvenio (which is a process mining software company) will aid IBM in offering its clientele a vast portfolio of AI-powered solutions for business automation.

On May 18, IBM announced its intent to buy out Europe-based Waeg to expand its portfolio of Salesforce services.

On Apr 30, IBM announced its intent to buy out Boston-based software provider, Turbonomic to boost management of applications’ performance across hybrid cloud environment and enhance its AI-based automation capabilities.

During the quarter, IBM announced the development of a processor chip with 2 nanometer (nm) nanosheet technology. Per IBM estimates, the chip is likely to achieve a 45% increase in performance compared to the existing most advanced 7nm node chips.

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