What to watch in IBM’s Q3 report – International Business Machines Corporation (NYSE:IBM)

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IBM (NYSE:IBM) is set to report Q3 results aftermarket today. Here’s what to watch with consensus estimates provided by FactSet.

Revenue consensus breakdown: Total, $19.1B; Cognitive Solutions, $4.3B; Global Business Services, $4.06B; Technology Services and Cloud Platform, $8.43B; Systems, $1.79B; Global Financing, $408.7M. 

Gross margin consensus breakdown:  Cognitive, 78%; Global Business, 26.9%; Technology Services and Cloud, 41.2%; Systems, 52.7%; Global Financing, 29.4%. 

EPS is expected to come in at $3.39. 

Segments to watch: Cognitive Solutions (the house of Watson) had revenue down 1% Y/Y in the last quarter so investors will look for improvements. The strategic imperatives and cloud business (cloud computing and AI) represented over half of last quarter’s revenue and Nomura expects a 7% growth here. 

Past performance: The past two quarters have featured revenue and EPS beats while gross margins fell below estimates. Revenue has beaten consensus 9 of the past 20 quarters while EPS beat 18 and had one in-line performance.

IBM shares are up 2.3% to $144.48.   

Previously: IBM -7.8% in worst day in years as analysts parse margins (April 18)

Previously: IBM +1% on Q2 revenue beat (July 18)

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