What To Expect From IBM’s Q4

by Trefis Team
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IBM (NYSE:IBM) is set to report its Q4 2017 earnings on January 18th. In Q3, IBM’s revenues stabilized at $19.2 billion while gross margins declined by 100 basis points. For Q4, we expect revenues of around $19.5 billion, and EPS of about $3. Additionally, revenues from the company’s Strategic Imperatives, which include revenue generated from analytics, cloud, mobile computing, security and social media, are expected to grow once more. We have created an interactive dashboard that illustrates our expectations for the company’s various divisions. You can modify the revenue and operating profit expectations for each division to see how fluctuations would impact the company’s Q4 EPS.

Below is a brief overview of our expectations for the quarter:

  • We expect Cognitive Solutions revenue to grow to $4.5 billion as both the annuity and transactional subsegments report growth. Furthermore, double-digit growth in cloud SaaS signings should boost revenues.
  • Global Business Service revenues are likely to stabilize at around $4.1 billion in Q4 as new signings grew in the previous quarter. Additionally, we expect order signings to improve in Q4.
  • The ongoing shift to the cloud will continue to negatively impact technology and cloud services revenues. IBM’s clients are signing large Infrastructure Cloud Service deals, in order to create large-scale hybrid IT environments (Hybrid Clouds). These deals are generally high-value and high-margin in nature, and should continue to drive growth for the company.
  • We forecast Systems revenues are to grow to about $2 billion, driven by growth in sales for the recently refreshed Z systems and Power Systems. Furthermore, double-digit growth in high-end product lines and all-flash array offerings will boost storage revenues during the quarter.

At present, we have a $151 price estimate for IBM, which is slightly below the current market price.

See our full analysis for IBM

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