Overview

• US technology firm's preliminary Q2 revenue rose 1% but missed analyst expectations

• Preliminary adjusted EPS for Q2 missed analyst expectations

• IBM shares tumble 16% in pre-market trading

• Company cites Z mainframe shortfall, capex shifts, and cybersecurity concerns for weak results

Outlook

• IBM says it will provide full-year expectations during its July 22 earnings call

Result Drivers

• MAINFRAME SHORTFALL - Co said weaker-than-expected Z mainframe and associated software sales, especially in Transaction Processing, drove revenue and profit shortfall

• CAPEX SHIFT - Clients shifted capex toward servers, storage, and memory ahead of expected price increases, disrupting typical buying patterns and impacting results

• CYBERSECURITY DISTRACTIONS - Rapidly evolving cybersecurity concerns distracted clients and contributed to delays in closing large deals

Company press release: ID:nPn91qqkCa

Key Details

Metric	Beat/Miss	Actual	Consensus Estimate
Q2 Revenue	Miss	$17.20 bln	$17.86 bln (16 Analysts)
Q2 Adjusted EPS	Miss	$2.93	$3.02 (17 Analysts)
Q2 Gross Margin		57.70%

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 16 "strong buy" or "buy", 8 "hold" and 2 "sell" or "strong sell"

• The average consensus recommendation for the it services & consulting peer group is "buy"

• Wall Street's median 12-month price target for International Business Machines Corp is $293.00, about 1% above its July 13 closing price of $290.23

• The stock recently traded at 22 times the next 12-month earnings vs. a P/E of 19 three months ago

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