IBM will be the latest big tech company to release earnings on Wednesday.
IBM – Daily Chart
IBM’s stock price is testing resistance, which returns to a gap that opened in late January. There is strong support below at $179, meaning it could be a critical report.
IBM is set to report its second-quarter earnings results on Wednesday, as investors expect to see strong software services growth due to AI bookings, balancing a drop in consulting growth.
Wall Street expects the New York-based tech company to post Q2 earnings per share of $2.17 on revenue of $15.62 billion, marking a rise of 0.96% year-over-year.
According to a report by investment bank Morgan Stanley, it could be a stricter setup into earnings after a recent outperformance, given the downside risk to consulting. The brokerage firm now expects IBM to report software upside.
“Throughout Q2, our checks have pointed to a continued challenging consulting spending environment, and we see discretionary spending still at-risk, while Generative AI consulting projects don’t appear to be having any material incremental impact on consulting growth today,” said analysts at Morgan Stanley.
They also added that while infrastructure outperformed last quarter, they don’t expect it to perform better than its seasonal standard.
Morgan Stanley sees Q2 revenue of $15.6 billion and $2.27 EPS forecasts 4% above consensus, without significant volatility expected in the June quarter.
IBM has improved by focusing on software and services, including artificial intelligence. Shares of IBM have been mixed in 2024 following a big rally last year after the company rotated its business plan to a cloud and artificial intelligence strategy.
The latest Q2 earnings report could be necessary for the stock price’s medium-term path. A move above the $184 level will continue the bullish tone, but a drop will test the support level at $179.
