Will Higher Software Revenues Boost IBM's Earnings in Q4?

Core Viewpoint - IBM is expected to report higher revenues in its Software segment for the fourth quarter of 2024, driven by product innovation and strong AI traction across various sectors [1]. Group 1: Software Segment Performance - The Software segment includes Hybrid Platform & Solutions, which encompasses software services, Red Hat, automation, and data & AI businesses, as well as Transaction Processing [2]. - The Zacks Consensus Estimate for Software revenues is projected at $7.82 billion, an increase from$7.51 billion in the same quarter last year, indicating a year-over-year rise of approximately 4.1% [8]. Group 2: Product Innovations and Acquisitions - IBM introduced the IBM Guardium Data Security Center to enhance data security across diverse environments, featuring a consolidated dashboard for monitoring and governance [3]. - The company acquired Prescinto, a provider of asset performance management software for the renewable energy sector, which integrates AI technology to improve asset management functionalities [5]. - The integration of Prescinto's technology is expected to enhance IBM's Maximo Application Suite capabilities, strengthening its position in the energy and utility sector [6]. Group 3: Strategic Partnerships - IBM formed a strategic partnership with Lockheed Martin to integrate its Granite large language models, aimed at accelerating AI-driven innovation in aerospace and defense applications, likely contributing to incremental revenues in the Software segment [7]. Group 4: Overall Financial Expectations - The total revenue consensus estimate for IBM stands at $17.56 billion, compared to$17.38 billion in the prior-year quarter, while the earnings consensus is pegged at $3.74 per share, down from$3.87 in the same quarter last year [9]. - IBM's earnings model suggests a likely earnings beat for the fourth quarter, supported by a positive Earnings ESP of +0.31% and a Zacks Rank of 3 [10].