Core Viewpoint - IBM is set to report its Q2 2025 earnings on July 23, with sales and earnings estimates at $16.59 billion and $2.64 per share respectively, while earnings estimates for 2025 and 2026 have remained unchanged at $10.95 and $11.66 per share over the past 60 days [1][4]. Earnings Estimates - The current earnings estimates for Q2 2025 stand at $2.64 per share, with a slight decrease in the Q1 estimate to $2.45 per share, while the full-year estimates for 2025 and 2026 are $10.94 and $11.66 respectively [2]. - The earnings surprise history shows an average surprise of 7.9% over the last four quarters, with the last quarter achieving a surprise of 12.7% [2]. Growth Drivers - The Software and Consulting segments are expected to drive growth, particularly through AI and cloud-related initiatives [4]. - IBM's collaboration with the Masters tournament to launch AI-native features is anticipated to generate additional revenue for the Consulting segment, with estimated revenues of $5.21 billion [5][6]. - The Software segment is projected to generate revenues of $7.48 billion, with IBM's acquisition of Hakkoda Inc. expected to enhance its data expertise and support AI transformation initiatives [7][8]. Competitive Landscape - Despite strong traction in hybrid cloud and AI, IBM faces significant competition from Amazon Web Services and Microsoft Azure, along with challenges from its ongoing transition to a cloud-based business model [9]. - The company has experienced pricing pressure that is eroding margins, and profitability has generally trended downward over the years [9]. Stock Performance - Over the past year, IBM's stock has increased by 53.9%, outperforming the industry average of 20.2%, but lagging behind Oracle's 79.6% gain [10]. - IBM's current price/earnings ratio is 24.88, which is higher than the industry average of 21.95 and its own historical mean of 13.75, indicating a premium valuation [12]. Long-term Outlook - IBM aims to capitalize on the growing trend of enterprises adopting a cloud-agnostic approach, focusing on hybrid cloud and generative AI solutions [13]. - The company expects that a better business mix and increased investments in growth opportunities will support long-term growth, particularly in the Software and Consulting segments [19].

Core Insights - IBM has established a new Microsoft Practice within IBM Consulting to enhance business outcomes for clients undergoing AI, cloud, and security transformations [1][2] - The new practice integrates IBM's industry expertise with Microsoft's technology portfolio, including Copilot, Azure OpenAI, and Azure Cloud, to simplify digital transformation for businesses [2][4] Company Developments - The Microsoft Practice will leverage a team of over 33,000 Microsoft-certified professionals across various markets, aiming to deliver tailored solutions for clients [3] - This initiative is expected to foster innovation and operational excellence, helping businesses unlock new growth opportunities [5] Client Impact - The practice will focus on developing industry-specific solutions for sectors such as retail, government, and financial services, building on existing offerings like IBM Copilot Runway [5][6] - IBM has successfully completed over 14,000 Microsoft projects globally, demonstrating its capability in implementing Microsoft generative AI solutions [6] Technology Integration - The Microsoft Practice will incorporate Microsoft's technology ecosystem into IBM Consulting's AI-powered delivery platform, enhancing flexibility and governance for clients [4][7] - More than 30 IBM Software offerings are already running on Microsoft Azure, facilitating easy integration for automation and AI solutions [7]