For International Business Machines Corp., earnings may need to be “nearly pristine” to preserve the stock in a tough environment for companies’ tech-budget decisions.
IBM IBM , which now receives about three-quarters of its revenue from tech services, reports first-quarter earnings Wednesday after the close of markets. In a recent note, Morgan Stanley analyst Erik Woodring said he is leaning “tactically cautious” into the report because of continued uncertainty about IT budgets in 2023.
Read from January: Morgan Stanley reverses IBM upgrade after 9 months as stock outperforms broader market Read: IBM’s ‘substantial’ dividend, debt take wind out of Big Blue’s sails as analyst downgrades stock “Services may be a source of relative strength given backlog dynamics, mainframe remains ‘in-cycle’ and software will likely decelerate given the timing of [Red Hat] renewals and [enterprise licensing agreement] headwinds,” Grossman said.
Over the past year, IBM has warned about currency headwinds because of strength in the dollar, with the U.S. Dollar Index DXY reaching a 52-week high in mid-September. Comparisons should be easier this report given the DXY index is only up 1.8%, compared with 12 months ago.
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