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Market Update

Earnings on Tap: IBM

The tech giant as been continually adjusting its product portfolio, enabling the company to generate healthy profits.


Tech giant  International Business Machines (IBM) will be reporting second-quarter results after the bell Wednesday. Earnings are likely to come in at $3.78 per share compared with $3.34 per diluted share reported in the year-ago period.

In the first quarter, the company's earnings missed Wall Street estimates, though it was only the second time in a decade that IBM's results were short of forecasts. First-quarter net profit declined 1% to $3.0 billion while total revenue fell 5% from the year ago period to $23.4 billion.

Commenting on the results, chairman and CEO Ginni Rometty said, "Despite a solid start and good client demand we did not close a number of software and mainframe transactions that have moved into the second quarter.

"Looking ahead, in addition to closing those transactions, we expect to benefit from investments we are making in our growth initiatives and from the actions we are taking to improve under-performing parts of the business," added Rometty.

The company announced in June its intent to acquire SoftLayer, a privately held vendor of cloud-computing infrastructure services. According to Morningstar analyst Grady Burkett, IBM's existing public cloud-infrastructure services appear to be gaining limited adoption outside the firm's core customer base.

IBM probably acquired SoftLayer to compete more effectively for new customers, improve its hybrid cloud offerings for existing customers, and use as a vehicle to deliver other products and services, opined Burkett.

Shares of the company are up 1.2% on a year-to-date basis and are presently trading near Morningstar's fair value estimate.

Gazala Parveen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.