IBM is expected to report a decline in sales for Q2 2024 due to cooling IT spending, with revenue estimated to be around $14.6 billion, a 6.6% decrease compared to the previous year. Despite the decline, earnings are expected to come in at $2.06 per share, slightly higher than consensus estimates but 5% lower than last year. The company’s core software operations, particularly led by Red Hat, are expected to continue driving performance as software sales grew by 5.5% in Q1. IBM is also focusing on capitalizing on the demand for artificial intelligence with its Watsonx platform, which enables enterprise customers to deploy customized AI models for their businesses.
The interest surrounding generative AI has resulted in IBM stock showing strong gains of 40% since early January 2021, reaching around $175 per share. In comparison, Arista Networks, a company benefiting from generative AI, has seen its stock surge by more than 300% over the same period. Arista is part of the Trefis High Quality Portfolio, which has outperformed the S&P 500 consistently. IBM’s focus on core areas such as cloud computing, AI, and automation, as well as making mid-size acquisitions to bolster its higher-margin software products, has led to a fair valuation at 19x consensus 2024 earnings. The company’s shift away from legacy businesses is seen as a positive move for future growth prospects.
Analysts see IBM’s focus on core areas and strategic acquisitions as key drivers for its future growth and performance. The company’s valuation at around $176 per share is considered fair given its focus on high-growth areas such as cloud computing and AI. The stock’s performance has been positive, showing gains of 40% over a period of roughly three years, despite facing some headwinds in its infrastructure support business. IBM’s revenue trends and focus on core areas such as software operations and AI are expected to continue driving the company’s performance in the coming quarters.
IBM’s focus on artificial intelligence and cloud computing, along with its strategic acquisitions in the software space, have positioned the company for growth in the future. The increasing demand for AI solutions for businesses has contributed to IBM’s strong performance in recent years and is expected to continue driving growth in the coming quarters. The company’s valuation at $180 per share is slightly ahead of the current market price and reflects its focus on high-growth areas such as cloud computing and AI. Investors are closely watching IBM’s Q2 2024 results, expected to be reported in mid-July, to gain insight into the company’s performance and future prospects.
