International Business Machines (IBM) is fresh off its strong quarterly results with growth returning to the narrative. IBM continues its slow and long turn back to growth, focusing on high-value faster-growing business segments while embracing the future of technology with artificial intelligence, blockchain, and hybrid cloud architecture via the Red Hat acquisition. Over the past few years, IBM has taken a blended approach of M&A, realigning its business mix to current and future trends, maintaining its dividend payout, and continuing to buy back shares while absorbing its Red Hat acquisition.
IBM’s executive leadership has set the growth and value narrative. Investors quickly realize the value Red Hat brings to the table while washing away fears that IBM overpaid for the $34 billion acquisition. IBM has been in a position of strength and has broken out past $140 after its recent quarterly earnings. Long-term imperatives are beginning to bear fruit in emerging high-value segments that have fundamentally changed its business mix while evolving its offerings to align with new-age information technology demands. The Red Hat acquisition will augment its transition away from its dependency on legacy businesses to the future of hybrid cloud, blockchain, artificial intelligence, and analytics.
Quarterly Earnings – Better than Expected
IBM reported Q2 2021 earnings that were better than expected, beating on both the top and bottom line. IBM reported EPS of $2.33 and revenue of $18.7 billion, beating analysts’ targets. The company laid out its growth narrative and Red Hat acquisition catalysts that are bearing fruit. IBM's overall cloud revenue grew by 13% while its cloud and cognitive software cloud revenue grew by 29% and global business services cloud revenue grew by 35% (Figure 1). Continue reading "IBM Posts Strong Q2 Results"