IBM (IBM) Q2 Earnings: What To Expect

The company's 4.72% yield is more than double the average yield on the S & P 500 Index. And that return has been above the index for some time. But IBM stocks, which have been below the S & P 500 for the past three and five years, haven't.
However, IBM's outlook is now much brighter as the company continues to evolve from a legacy business to a high-growth cloud specialist. And the market has begun to reward the company's turnaround. Can this dynamic continue? The answer will come after the company reports the results for the second quarter of 2022 after Monday's Closing Bell. IBM's cloud capabilities have shown to be strong, more modern, and providing the kind of profitability needed to support higher multiples in the last few quarters.
In particular, IBM's Hybrid Cloud now provides IBM with the foundation for running any application. As of the end of 2021, 3,800 customers were using the hybrid cloud platform, and IBM added 200 new customers in the first quarter, for a total of more than 4,000. Today, the hybrid cloud business accounted for more than 70% of total software revenue in the last quarter. The market is now giving IBM more credit for the move to the cloud.
In the first quarter, IBM reported better-than-expected results, issued guidance that exceeded Wall Street estimates, and exceeded IBM's share price by more than 7%. The results highlight the level of execution the company has achieved in a large, multi-year restructuring. While the S & P 500 index fell 19%, stock prices are now up about 5% year-on-year. However, in order for IBM stocks to maintain their out performance, the company needs to demonstrate continued operating leverage and accelerated revenue growth on Monday.
Wall Street expects New York-based companies to generate $15.25 billion in revenue and $2.28 per share in the three months to June. This is compared to last year's same quarter, when earnings per share were $2.33 with sales of $18.75 billion. For the full year through December, revenue is projected to increase 22% year-on-year to $9.69 per share and revenue to increase $60.89 billion to 6.2%.
Technology giants have struggled to grow revenue over the last decade. A large economy like to see cloud leaders such as Amazon (AMZN) and Microsoft (MSFT) making double-digit revenue. Not taking advantage of expansion. However, the company's acquisition of Red Hat has allowed IBM to make a big leap to compete with its established rivals. In addition, a spin-off from Kyndryl has enabled IBM to better leverage its portfolio of technology and consulting services to develop hybrid cloud and AI growth. In addition, execution is no longer an issue, as street revenue forecasts exceeded in nine of the last ten quarters. In the first quarter, IBM reported revenue of $14.2 billion, surpassing both revenue and revenue, surpassing its estimates of $352 million. Meanwhile, adjusted earnings per share were $1.40. 2 cents was better than consensus. Demand for hybrid cloud was a major driver of strong results, with software revenue up 12% to $5.8 billion. Revenue from hybrid platform products increased by 7% and revenue from Red Hat increased by 18%, which was also a key factor.
Management said IBM now has a "more focused business" as a result of the Kyndryl spin-off that simplifies the business. In other words, the company has moved from a turnaround story to a growth story. Investors want to see if IBM can build on this success on Monday.