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IBM’s (NYSE:IBM) Q4 Earnings Preview: Here’s What to Expect

Story Highlights

Wall Street expects IBM’s Q4 revenue to decline due to currency headwinds. Nonetheless, the company’s streamlining efforts and improved margins are anticipated to help it deliver growth in Q4 adjusted earnings.

Tech giant International Business Machines (NYSE:IBM) is scheduled to announce its results for the fourth quarter of 2022 after the financial markets close on January 25. Analysts expect the company’s earnings to grow despite significant currency headwinds and subdued IT spending.

Q4 Expectations

Despite macro challenges, IBM surpassed analysts’ expectations for the third quarter of 2022. Revenue grew 6.5% to $14.1 billion, driven by growth across Software, Consulting, and Infrastructure segments. Adverse currency fluctuations impacted the top line by $1.1 billion.

Meanwhile, adjusted earnings per share (EPS) declined nearly 2% to $1.81 due to the impact of labor cost inflation, mainly in the Consulting business, and significant forex headwinds. Regardless of a challenging backdrop, IBM guided for free cash flow of nearly $6 billion for Q4 2022. The company generated $4.1 billion in free cash flow in the first nine months of 2022.

Analysts expect IBM’s Q4 revenue to decline nearly 2% year-over-year to $16.4 billion. Adjusted EPS is expected to increase 7.5% to $3.60, driven by improved margins.    

Is IBM a Buy, Sell, or Hold?

Ahead of the Q4 results, MoffettNathanson analyst Lisa Ellis upgraded IBM stock to a Hold from Sell, as a CIO survey by her firm indicated that there is likely going to be continued strong demand for IT Services in 2023, despite recessionary fears. Ellis believes that following its turnaround, IBM is well positioned to deliver sustained organic revenue growth in the low-to-mid single digits range.

Overall, IBM stock has a Hold consensus rating based on one Buy, three Holds, and one Sell. The average IBM price target of $147 implies 3.6% upside potential. Shares are essentially flat on a year-to-date basis.   


IBM’s Q4 revenue is expected to decline due to significant currency headwinds. Nonetheless, the company’s streamlining efforts could drive higher adjusted earnings.  

Wall Street is sidelined on the stock but is gradually acknowledging the company’s turnaround efforts, including streamlining initiatives as well as its hybrid cloud and AI strategy.    

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