IBM’s (IBM) 1Q- Another EPS Miss Posing as a Beat

A look at the 10-Q reveals the usual list of unsustainable accounting-related benefits

IBM’s adjusted EPS of $1.68 for 1Q24 beat forecasts by 9 cents. However, the announcement of the HashiCorp deal could not save the stock from the quarter’s top-line miss which has led to stock down some 10% since the quarter was announced.

We believe IBM has utilized various levers for years to beat expectations in past quarters and we have documented many of these in past reports including IBM- More Big Blue Red Flags in 4Q. Many of these benefits were on display again in the first quarter and we estimate they amounted to as much as 42 cps in unsustainable benefits. In fact, two of the tailwinds we have cited in the past turned to headwinds this quarter amounting to 12 cps. That wasn’t enough to offset the benefits, but it does raise the question of what is going to happen to growth when the other benefits disappear as well.

For a closer look at these items, let’s get behind the numbers…