IBM beats Q1 2026 estimates with EPS $1.91, revenue $15.9B as J.P. Morgan cuts price target
IBM beats Q1 2026 estimates with EPS $1.91, revenue $15.9B as J.P. Morgan cuts price target to $270 from $283
- J.P. Morgan Securities cut IBM price target to $270 from $283 after it maintained full-year guidance despite slowing revenue growth.
- Q1 2026 revenue was $15.92B, up 9% YoY, supported by AI-driven hybrid cloud and mainframe growth.
- Q1 revenue grew 6% at constant currency, with broad-based strength in software and infrastructure.
- Software revenue rose 8%, driven by 16% growth in Data and 10% growth in Red Hat.
- Infrastructure revenue increased 12%, including 48% growth in IBM Z and double-digit distributed infrastructure.
- Consulting grew 1%, with signings up 6% and generative AI now ~30% of backlog.
- Consulting revenue slightly missed estimates despite overall Q1 earnings and revenue outperformance.
- Margins expanded strongly: operating pretax margin +140 bps, infrastructure margin +720 bps, software +60 bps.
- Free cash flow was $2.2 billion, up 13% YoY, the strongest Q1 in a decade.
- Full-year 2026 guidance maintained: 5%+ constant-currency revenue growth and ~$1 billion free cash flow increase.
- Management now expects software to grow 10%+ in 2026, data segment low-20%+, consulting low-to-mid single digits.
- IBM increased its quarterly dividend to $1.69, raising its regular payout to shareholders.
- Key risks: macro/geopolitics, infrastructure and mainframe cycle dependence, despite unchanged guidance and no reported demand deterioration.
- Strong quarter, driven by accelerating software and infrastructure growth, expanding margins, and robust free cash flow.
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