IBM earnings preview: Can management reassure investors after preliminary Q2 miss

IBM (IBM) is set to release its full second-quarter results after the market closes on Wednesday, July 22, after last week pre-announcing preliminary results that fell short of Wall Street expectations and triggered the stock's steepest one-day decline in at least 58 years.

The company said preliminary second-quarter revenue rose 1% year over year to $17.2B, missing analysts' expectations of $17.9B, while it projected operating (non-GAAP) earnings of $2.93 per share, below the consensus estimate of $3.02. CEO Arvind Krishna attributed the shortfall to customers shifting capital spending toward servers, storage and memory to secure AI infrastructure ahead of expected price increases.

Although the headline figures are already known, investors will be focused on management's outlook and commentary during Wednesday's earnings call, particularly on enterprise AI demand, software and consulting trends, infrastructure spending, and whether the spending shifts seen late in the quarter are expected to persist.

IBM has beaten consensus EPS estimates in each of the past eight quarters and topped revenue estimates in six of those periods. Ahead of the report, analysts expect the company to report earnings per share of $2.93 on revenue of $17.26B, though those estimates are likely to reflect the company's preliminary disclosure.

Rating IBM as Sell, Seeking Alpha analyst Ricardo Fernandez stated, “IBM faces structural challenges in capturing AI demand, with AI-driven disruption threatening its core transaction processing and consulting segments. This poses a risk to IBM's growth strategy and potential returns from expensive software acquisitions.”

Meanwhile, Rick Orford says the stock remains a Buy despite the recent crash. “IBM's differentiated AI strategy, robust cash flow ($4.8B FCF YTD), and continued dividend growth underpin long-term confidence.”

IBM shares are down nearly 26% over the past year.