IBM is expected to release second-quarter 2015 results on July 20, after the market closes. Last quarter, IBM posted earnings of $2.91, decreasing from $5.81 the quarter prior. The Estimize consensus, pulling estimates from 68 different analysts, is the same as the Wall Street consensus at $3.80. Estimize is calling for a revenue of $20.970B, just below the Wall Street consensus of $21.001B. For the last two years, YoY revenue growth has been negative. Moreover, for the past seven of eight quarters, IBM earnings have missed both the Estimize and Wall Street consensus, so it would not be a surprise if this trend continues throughout the next quarter.
Similar headwinds experienced in the first quarter will be in play again in Q2, specifically the stronger dollar. While China's stock market rout occurred towards the end of the quarter and will not be reflected in results, the company that will likely mention what impact they expect from the decline during the second half of the year. Weak earnings could also be due to a decline in client spending, and slow demand in the software sector that IBM discussed last quarter.
The company is very bullish on its strategic imperatives, areas of IBM's business that it expects to grow from $25 billion in revenue to over $40 billion in revenue over the next few years. A majority of IBM's growth will come from these segments, including cloud, security, mobile, social, and analytics. A large portion of this growth already is due to IBM's mobile partnership with Apple. In fact, in 2014, IBM was already making $1 billion merely through its mobile segment. As software is the most profitable segment of IBM's business, IBM could be growing profits more quickly than revenue.
Overall, IBM's earnings should not be missed, and there will likely be a wide gap between reported and adjusted earnings due to macroeconomic factors. However, IBM does have a sound long-term plan, specifically with its strategic imperatives, which could help the company maintain its profitability.
