International Business Machines, or simply IBM (IBM.US), is set to report earnings for calendar Q1 2023 today at 9:10 pm BST, after the close of the Wall Street session. IBM will be the fourth Dow Jones member to report earnings this week (after Goldman Sachs, Johnson & Johnson and Travelers). Report from IBM will also be one of the first reports from major US tech companies and may help gauge sentiment and assess the outlook for the sector.
What does the market expect from the report?
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Create account Try a demo Download mobile app Download mobile appIBM is expected to report Q1 EPS at $1.26, which would be lower than $1.40 reported a year ago in Q1 2022. On the other hand, Q1 revenue is seen coming in at $14.35 billion, a small increase from $14.20 billion reported in Q1 2022. Also one-off charges are expected to weigh on results - around $300 million charge related to Kyndryl spin-off as well as charges related to divestment of Watson healthcare business or previously announced lay-off of almost 4 thousand workers. Growth in IBM's key software segment is expected to continue to slow with both - profit and sales - seen growing at the slowest pace in two years.
What to watch in the report?
A lot of attention will be on cloud business. Cloud computing is a fast-growing and high-margin business and IBM is trying to picture itself as one of the leaders in the field. However, as competition is rising and inflation stays elevated, infrastructure management and development costs are rising. This could put a brake on growth of the segment. Analysts expect growth in cloud sales to struggle to meet pace of growth in costs. Also, some announcements may be made on further restructuring of the company - WSJ report released earlier in April suggested that IBM is considering selling its weather business for around half of the 2015 purchase price and realize a loss on the investment.
A look at the chart
Taking a look at IBM chart (IBM.US) at H4 interval, we can see that the share price has been struggling recently and is trading in a bearish price channel. Share price failed to break above the upper limit of the channel last week at the end of the first week of April and has been slowly pulling back since. Stock is attempting to break below the $126.00 support zone. A break below would pave the way for a deeper drop with the lower limit of the channel, currently in the $115 area, being a potential target. However, as earnings releases tend to trigger large moves, technical outlook may change after stock reacts to the Q1 financials.
Source: xStation5
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