TLDR
- IBM reports third-quarter earnings Wednesday after the close, with analysts expecting EPS of $2.85 to $2.86 on revenue of about $16.8 billion.
- The stock was down 0.67% at $240.30 in premarket trading and is still down nearly 17% since July 13.
- IBM fell 25% on July 14 after a rare pre-announcement of weak second-quarter results, its worst session on record.
- Jefferies calls Q3 a “show-me story,” while Morgan Stanley says the setup after Q3 “is more challenging.”
- The average price target is $259.76, and IBM has recent deals with OpenAI and Together AI.
IBM (IBM) stock was down 0.67% at $240.30 in premarket trading Wednesday, according to Benzinga Pro data. The company reports third-quarter earnings after the closing bell.
International Business Machines Corporation, IBM
Analysts expect adjusted earnings of $2.85 a share, according to FactSet. Benzinga puts the figure at $2.86, up from $2.65 a year ago.
Revenue is forecast at about $16.8 billion, compared with $16.33 billion a year earlier. That is roughly 3% growth, which is a pickup from the prior quarter but well below the 9.5% growth in the first quarter.
The bar is low for a reason. IBM pre-announced its second-quarter results a week early, and the stock fell 25% on July 14. It was the worst trading day on record for the company.
What Happened in July and Since
The stock has not bounced back much. It remains down nearly 17% since the July 13 close, while the S&P 500 and Nasdaq Composite have each gained more than 2%.
The miss came from poor execution and a delay in several large mainframe deals, according to Jefferies analyst Brent Thill. By late July, CEO Arvind Krishna said a third of those deals had closed.
Thill says the stock could move higher if IBM recovers two-thirds to three-quarters of the missed deals and raises full-year guidance. He calls the quarter a “show-me story with a lowered bar.”
Daniel Morgan of Synovus Trust says finding a positive catalyst before the report won’t be easy. Expectations, in his view, are subdued after such a steep drop.
What Analysts Are Watching
Citi analyst Fatima Boolani expects results to land close to investor expectations. She sees Red Hat, IBM’s main growth engine, picking up a bit, though weaker software products could cancel that out.
Boolani says mainframe revenue should stay soft this quarter but could rebound in the fourth quarter. She also expects consulting sales to be modest, with better profit margins than pure-play IT service peers.
Morgan Stanley is less upbeat about what comes after. Its analysts called Q3 “neutral to positive” as delayed deals land, but said the setup afterward is tougher, with higher revenue expectations and a weaker macro backdrop.
On the ratings front, the stock carries a Buy rating with an average price target of $259.76. Morgan Stanley is Equal-Weight with a $238 target after raising it on Oct. 15.
RBC Capital kept its Outperform rating and $270 target on Oct. 13. Truist started coverage Oct. 9 with a Hold and a $240 target.
IBM has also been busy on the deal front. It formed a partnership with OpenAI and signed a $240 million, multiyear agreement with Together AI.
It also announced a self-hosted option for IBM Bob and a research tie-up with Siemens Energy on chip design. Benzinga’s scorecard gives IBM a strong quality score of 81.33 but a weak value score of 25.29.
Results land after the close Wednesday, with the premarket price at $240.30.
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