IBM beat Q2 expectations

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Canaccord Genuity Technology Analyst Eyal Ofir notes IBM reported Q2 results that beat expectations across the board. Big Blue said revenue for the recent quarter was $26.7 billion (up 12% year over year), higher than Ofir's and the Street’s expectations of $25.5 billion and $25.4 billion, respectively. Meanwhile, adjusted EPS was $3.09, also beating Ofir’s $2.91 estimate and the Street’s $3.02. Quarterly upside was driven by strong transactional revenue in both hardware and software, and specifically increased demand for mainframes and middleware software. In addition, growth markets keep on outperforming and IBM’s top line continues to enjoy tailwinds from FX movements. On the bottom line, the majority of the beat was fuelled by greater revenue and strong gross margin performance, which was reported at 46.4% vs. expectations of 46.0%. The only weakness was found in the public sector and Japan; management, however, remains upbeat about the business and its ability to execute on growth initiatives. However, as the stock has rallied in recent days and will likely move up further this week, Ofir believes that most of the upside from the results is priced in, and suggests waiting on the sidelines for now.

IBM (IBM : NYSE : US$185.21), Net Change: 9.93, % Change: 5.67%, Volume: 13,080,821

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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