IBM (IBM) reports quarterly earnings after-hours. Analysts expect revenue of $18.82 billion and eps of $2.41. The revenue estimate implies 3% growth Y/Y. Investors should focus on the following key items:

Has Revenue Declines Subsided?

There used to be three certainties in life – death, taxes and IBM’s quarterly revenue decline. IBM had been in a continuous restructuring mode, making the transition from a focus on hardware to software and services. The narrative may have changed last quarter when the company reported 4% revenue growth Y/Y.

Four of the company’s five operating segments demonstrated growth, with Systems leading the way up 32%. Cognitive Solutions (24% of total revenue) experienced low single-digit revenue growth. This reflects growth in Watson solutions and security, and weakness in IBM’s traditional analytics products. Technology Services & Cloud Platform (43% of total revenue) was down 1% as SaaS growth was muted by a decline in transactional revenue. As more demand moves to the cloud, revenue from this segment may continue to stagnate.

The stalwart was the Systems segment (15% of total revenue). IBM Z revenue was up 70% Y/Y, driven by the company’s family of servers offering secure cloud infrastructure. As more work is done remotely the need for cloud services will continue to grow. Can IBM compete with Amazon (AMZN), Google (GOOGL) and Oracle (ORCL) in cloud services long-term without having to sacrifice on price? We shall soon find out. Read more:

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