Core Viewpoint - Unisys Corporation (UIS) is expected to report a significant decline in earnings for the second quarter of 2025, with a projected loss of 34 cents per share, compared to a profit of 16 cents in the same quarter last year, indicating a 312.5% decrease in EPS [1][5]. Financial Performance - The consensus estimate for second-quarter revenues is $442.5 million, reflecting a 7.5% decrease from the previous year's figure [5][8]. - UIS has a history of earnings surprises, having outperformed the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 46.9% [5]. Revenue Drivers - Growth in Device Subscription Services (DSS), AI-led solutions, and enterprise storage is anticipated to contribute to sequential revenue gains [8][10]. - UIS projects approximately $375 million in Ex-L&S revenues, indicating mid-single-digit sequential growth [11]. - Strength in multi-year infrastructure contracts and increased demand for PC refreshes, driven by Windows 11 and AI compatibility, are expected to support performance [12][13]. Challenges - Timing-related headwinds from license and support renewals and softness in discretionary public sector projects may hinder revenue growth [14]. - Labor and training costs associated with ramping up operations may exert pressure on margins [15]. Stock Performance and Valuation - UIS shares have increased by 9.3% over the past three months, outperforming the Zacks Computers - IT Services industry, which grew by 3.6% [16]. - The stock is currently trading at a forward price-to-sales (P/S) multiple of 0.15X, significantly below the industry average of 18.58X [19]. Strategic Positioning - UIS is focusing on expanding its presence in high-growth areas such as digital workplace services, cybersecurity, and AI-enabled solutions [21]. - The company is experiencing strong momentum in new business signings, particularly in high-volume DSS contracts [21]. Outlook - While UIS is making progress in high-growth segments, short-term pressures from license renewal timing and cautious public sector spending may impact margins and revenue momentum [24]. - The near-term earnings trajectory appears uncertain, with projected year-over-year EPS decline and modest revenue contraction [25].

Core Insights - Investors are focusing on IT services stocks that balance innovation and stability, with Unisys Corporation (UIS) and International Business Machines Corporation (IBM) as key players in this sector [1] Unisys Corporation (UIS) - Unisys is undergoing a strategic transformation aimed at expanding solution-based revenue streams, operational optimization, and enhancing brand relevance in AI and cybersecurity [2] - The Device Subscription Services (DSS) and Digital Workplace Solutions (DWS) are major growth drivers, with significant contracts signed for large-scale device management [2] - The backlog in the DWS segment is growing at a double-digit pace year over year, positioning Unisys for sequential growth in the latter half of 2025 [3] - Unisys is enhancing its security portfolio with Post-Quantum Cryptography solutions and AI-enabled frameworks, which are expected to drive revenue growth despite current discretionary spending softness [4] - The company aims for $100 million in pre-pension free cash flow in 2025 through operational improvements and cost control [5] - The Zacks Consensus Estimate for UIS's EPS indicates a year-over-year increase of 28.9%, with earnings estimates for 2025 revised upward by 132% in the past 60 days [11] International Business Machines Corporation (IBM) - IBM is enhancing its AI portfolio by integrating governance and security into a unified platform, marking a significant step toward responsible AI deployment [6] - The software segment, which constitutes nearly 45% of IBM's business, achieved 9% growth in Q1 2025, driven by strong demand for Red Hat and AI-powered tools [8] - IBM's shift to subscription and platform-based services has resulted in an 80% recurring revenue base in software, contributing to high-margin gains [10] - The Zacks Consensus Estimate for IBM's 2025 EPS implies a year-over-year growth of 6%, with earnings estimates revised upward by 0.4% in the past 60 days [12] - IBM shares have surged 32.8% year-to-date, reflecting strong market performance [13] Comparative Analysis - Unisys is positioned for upside due to its transformation-driven momentum and focus on innovation in AI and cybersecurity, while IBM offers stability and scale but may have more moderate upside potential [17][18] - UIS is trading at a forward P/E ratio of 5X, below its median of 10.59X, while IBM's forward sales multiple is at 25.85X, above its median of 21.47X [15] - Unisys's emphasis on recurring revenues and emerging technologies provides a compelling turnaround narrative, contrasting with IBM's established market position [18][20]