To The Moon

The Case for IBM versus SNDK (SanDisk)

International Business Machines Corporation will report second-quarter 2026 results on July 22, 2026 Post-Mkt; the market now weighs a consensus revenue view near 17.86 billion US dollars against management’s preliminary update of 17.20 billion US dollars and looks for clarity on large-deal timing, margin resilience, and AI monetization.

Market Forecast

Consensus for the current quarter points to revenue of 17.86 billion US dollars, adjusted EPS of 3.02, and EBIT of 3.74 billion US dollars, implying year-over-year increases of 7.70%, 14.34%, and 19.17%, respectively. By contrast, the company’s preliminary update calls for revenue of 17.20 billion US dollars (up 1.31% year over year) and adjusted EPS of 2.93 (up 4.64% year over year), highlighting a gap to earlier external expectations; no company gross margin or net margin forecast has been provided.

IBM’s revenue mix last quarter was led by Software at 7.05 billion US dollars, followed by Consulting at 5.27 billion US dollars and Infrastructure at 3.33 billion US dollars, with Financing contributing 220.00 million US dollars and Other at 48.00 million US dollars. Within that mix, Software remains the most promising engine given scale and margin leverage; it delivered 7.05 billion US dollars last quarter and was most recently cited as growing 14% year over year in the 2025 fourth quarter, while the Consulting organization is positioned to convert AI-related bookings and delayed large deals as procurement cycles normalize.

Last Quarter Review

In the last reported quarter, International Business Machines Corporation generated approximately 15.92 billion US dollars of revenue, with a gross profit margin of 56.23%, GAAP net profit attributable to shareholders of 1.22 billion US dollars, a net profit margin of 7.64%, and adjusted EPS of 2.93, which increased 4.64% year over year.

A notable financial highlight was the maintenance of gross margin above 56%, supported by a high software mix and disciplined cost execution. On the business side, Software contributed 7.05 billion US dollars, Consulting 5.27 billion US dollars, and Infrastructure 3.33 billion US dollars; the most recently disclosed growth marker for Software was a 14% year-over-year increase in the 2025 fourth quarter, underscoring the segment’s ability to compound premium, recurring revenue.

Current Quarter Outlook

Main business: Software and Consulting revenue drivers

The near-term revenue trajectory hinges on whether large software and hybrid-cloud transactions that slipped late in the quarter can be closed and recognized on a timely basis. Management’s preliminary view highlighted closing delays in “numerous large deals,” which depressed the top line relative to earlier expectations; investors will look for evidence that those deals are contracted and moving through revenue in July and August rather than having been outright canceled. Because Software carries structurally higher gross margins than the rest of the portfolio, the pace of deal closure will meaningfully influence both revenue and margin prints for the quarter.

Consulting is positioned to convert pipeline in data, AI, and application modernization as client budgets reset following a period of heavy hardware procurement. Analyst commentary indicates that a short-term skew of budgets toward servers, storage, and memory to support AI workloads weighed on software outlays late in the period; as that rush normalizes, Consulting-led transformations can reaccumulate momentum and feed back into Software attach. A practical marker to watch is backlog conversion and the signings run-rate across data and AI, application modernization, and hybrid cloud transformation mandates; improvements here would support second-half acceleration in both Consulting revenue and Software cross-sell.

The Case for SNDK (SanDisk)

Sandisk has built its business around NAND flash memory, a technology that is becoming increasingly important as AI workloads require larger, faster storage to support inference, retrieval-augmented generation (RAG) and expanding context windows. Its enterprise SSD portfolio, powered by BiCS8 technology, has strengthened the company's position in AI data centers, where demand for high-capacity, low-latency storage continues to increase. As enterprises scale AI deployments, enterprise SSD adoption is expected to remain a key long-term growth driver.

Beyond product innovation, Sandisk has been reshaping its business model to reduce the cyclicality associated with the NAND market. Its New Business Model framework, based on multi-year supply agreements backed by financial commitments, has improved demand visibility while providing customers with long-term supply assurance. The company has also strengthened its supply chain through the extension of its Kioxia joint venture and investment in long-term DRAM supply through Nanya, enhancing manufacturing flexibility and supporting future growth.

These initiatives have already begun translating into stronger operating performance. In the third quarter of fiscal 2026, data center revenues increased 233% sequentially to $1.47 billion, while non-GAAP gross margin expanded to 78.4% from 51.1% in the previous quarter. The Zacks Consensus Estimate for fiscal 2026 revenues is pegged at $19.59 billion, suggesting 166.4% year-over-year growth, while the consensus mark for EPS is pegged at $66.54 compared with $2.99 in fiscal 2025, revised up by 1.31% over the past 30 days, reflecting improving profitability as AI-driven enterprise storage demand continues to accelerate.