will-ibm-report-another-upside-surprise-with-its-quarterly-earnings?

Will IBM Report Another Upside Surprise With Its Quarterly Earnings?

IBM (IBM) reports first-quarter earnings late Tuesday, providing insight on how well its multiyear transition is performing. IBM stock climbed ahead of the report.




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Three months ago the tech icon reported better-than-expected results for its fourth quarter, causing IBM stock to jump 5.7%.

The company is expected to report adjusted earnings from continuing operations of $1.38 a share. That would be up 2% from the year-ago period, with revenue up 5% to $13.87 billion.

The estimate reflects the spinoff of its infrastructure management company, called Kyndryl, that IBM completed in November 2021.

IBM stock climbed 1.3% to 127.80, during morning action on the stock market today.

IBM continues to undergo a significant, multiyear restructuring that has focused on an open, hybrid cloud-computing platform, in addition to artificial intelligence. It’s why IBM sold its health care data analytics business from its Watson Health unit for a reported $1 billion, in January.

A hybrid cloud architecture means IBM can provide its customers with both a public cloud and a private cloud. Leaders in the public cloud space include Amazon (AMZN) and Microsoft (MSFT).

IBM Stock Hit By Business Shifts

The major shifts in business operations help to explain why IBM growth in revenue and earnings has been a struggle.

“Having already fallen behind in the public cloud, IBM is betting big on the so-called hybrid cloud,” said Daniel Morgan, senior portfolio manager at Synovus Trust, in a note to clients.

“The hybrid cloud opportunity is significantly larger, as legacy enterprises are just starting to shift more of their workloads to the cloud amid internal IT system upgrades,” Morgan said.

IBM is committed to $20 billion in mergers and acquisitions through 2024, focusing on software.

“We are still in need of more evidence that IBM can ride Software and Consulting to greener pastures once benefits from its Kyndryl relationship wear off and remaining segment performance becomes the key focal point,” CFRA Research analyst David Holt said in his note to clients.

Another key focus from the earnings report will be on any signs of slowing in Europe due to the Russia/Ukraine war.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

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