What To Expect From IBM After Q2 Earnings Beat

by Trefis Team
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IBM (NYSE:IBM) announced its Q2 2018 earnings on July 18, beating market expectations on revenues and EPS. The company reported a 4% year-on-year (y-o-y) increase in net revenues to $20 billion. The tech giant reported modest mid-single digit growth across segments, which was offset by slightly lower gross margins. However operating expenses including R&D and SG&A expenses were lower on a y-o-y basis, which led to an improvement in its operating profit margin. As a result of comparatively lower operating expenses through the quarter, net income was 3% higher than the comparable prior year period at $2.8 billion. Consequently, the company’s non-GAAP diluted EPS stood at $3.08, or 5% higher on a y-o-y basis.

We have summarized our full year expectations, based on the company’s guidance and our own estimates, on our interactive IBM earnings dashboard. If you think differently, you can change expected segment revenue, EBITDA margin and net income margin for IBM to gauge how changes will impact its expected EPS.


Going forward, we expect the company’s Technology Services and Business Services revenues to grow in the low single digits, keeping up the trend from recent quarters. Similarly, Systems revenues are also likely to be up in the low single digits, while Cognitive Solutions revenue is forecast to grow in the high single digits through the year. As a result, IBM’s net revenues for the year are forecast to see a mid single digit percentage increase to $82 billion, per Trefis estimates. We forecast the company’s adjusted EBITDA margin to compress by 50 basis points for the full year, while net income and EPS are likely to be roughly flat over 2017 levels. We expect IBM’s diluted EPS for the full year to be around $13.70, which is about in line with consensus estimates.

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