Will Higher Software Revenues Buoy IBM's Earnings in Q2?

Core Insights - IBM is expected to report higher revenues in the Software segment, driven by product innovation and the growing influence of watsonx.ai across various sectors [1][9] Group 1: Software Segment Performance - The Software segment includes Hybrid Platform & Solutions, which encompasses software services, Red Hat, automation, and data & AI businesses [2] - The Zacks Consensus Estimate for Software revenues is $7.48 billion, reflecting an increase from $6.74 billion in the same quarter last year, with an estimated rise of 11.6% year over year to $7.52 billion [6][9] Group 2: Strategic Partnerships and Acquisitions - IBM extended its partnership with Microsoft by establishing a new Microsoft Practice within IBM Consulting, aiming to develop innovative offerings across various industries [3] - IBM acquired Hakkoda Inc., a data consultancy provider, to enhance its data expertise and support clients' AI transformation initiatives [4] Group 3: Innovation and AI Initiatives - IBM launched watsonx AI Labs in New York City to accelerate AI adoption and foster collaboration with startups and enterprises [5] - The lab aims to connect IBM's resources with emerging AI developers to create enterprise AI solutions, potentially leading to increased revenues in the Software segment [5][9] Group 4: Overall Financial Expectations - The total revenue consensus estimate for IBM stands at $16.58 billion, up from $15.77 billion in the prior-year quarter, with earnings expected to grow from $2.43 to $2.64 per share [7]