IBM Earnings: Mixed Results but Even-Keeled Outlook Ahead

IBM’s second-quarter results were mixed—with a revenue miss but a strong earnings beat. Yet, with a maintained outlook, IBM appears to be on a steady path for the remainder of the year to hit moderate revenue growth thanks to steady performance in software and consulting, especially related to the boom in data and artificial intelligence. We retain our fair value estimate of $126 per share for the narrow-moat IT services provider, which leaves shares slightly overvalued. We continue to believe that there are more appealing opportunities in the IT services space, such as Cognizant, given our $91 fair value estimate for the narrow-moat name.