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Improved Revenue Trajectory for IBM No Surprise

We see a strong embedded position in IT services and cloud markets, and expect an improved outlook for the systems business.

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IBM reported a solid third-quarter result and notably improved its revenue trajectory. While it was good to see IBM improve its revenue trajectory, we had expected the result given management's prior guidance around the second half of the fiscal year. Still, with the strong, positive reaction, we think the market is cheered by the possibility of a looser future top-line growth.

While we expect IBM to return to modest revenue growth over the midterm, we have pared back our overall growth in margin assumptions, as we think the turnaround in global business services and technology services in cloud platforms will be more prolonged than originally thought.

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