2 Tech Earnings Reports to Watch

By Daniel SparksMarketsFool.com

Earning season is here, and some of the biggest names in tech are set to release their financial results for the fourth calendar quarter of 2016 in the coming days. Of the tech stocks with earnings reports around the corner, IBM (NYSE: IBM) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) will be some of the most high-profile reports to watch. Here's a brief overview of what to look for when each company reports results.

Continue Reading Below

Image source: Getty Images.

All eyes on strategic imperatives

International Business Machines is the first of these two companies scheduled to report quarterly results. IBM will report results after market close this Thursday and will host a conference call to discuss results at 5:00 PM ET.

More From Fool.com

IBM investors have recently turned their focus toward IBM's more nascent strategic imperatives, or the company's cloud, analytics, mobility, and security offerings. Growing to 40% of total revenue one year earlier than the company was targeting, IBM's strategic imperatives are growing faster than the rest of its business. While total third-quarter revenue was flat year over year, strategic imperatives revenue was up a nice 16%.

For investors to remain optimistic about IBM's strategic imperatives, look for this segment's growth to match or exceed the 16% growth achieved in Q4.

On average, analysts expect IBM to report total fourth-quarter revenue and EPS of $21.7 billion and $4.89, respectively. In IBM's fourth quarter of 2015 the company reported revenue and EPS of $22.1 billion and $4.84, respectively.

Can steep revenue growth persist?

For Alphabet, which reports its fourth-quarter results exactly one week after IBM, revenue growth will be key. Alphabet's core Google advertising business has been firing on all cylinders, helping total revenue and EPS exceed expectations in the company's most recent quarter. The company reported 20% and 23% year-over-year growth in revenue and EPS in Q3, respectively, as aggregate paid clicks, or the total number of clicks advertisers pay Google for, soared 9% sequentially and 33% year over year.

Image source: The Motley Fool.

While Alphabet CFO Ruth Porat has warned that tougher year-over-year comparisons will make similar growth in Q4 unlikely, analysts are still modeling for a sharp hike in the company's top line. On average, analysts expect Alphabet's revenue to increase 18% year over year. Can the company's ad revenue continue strongly enough to help the company achieve such a strong increase in total revenue, even when the company is up against a tough year-ago comparison?

The consensus analyst estimate for Alphabet's fourth-quarter revenue and non-GAAP EPS is $25.1 billion and $9.66, respectively. These estimates imply 18% and 11% year-over-year growth in revenue and non-GAAP EPS, respectively.

After Alphabet reports its fourth-quarter results on Thursday, Jan. 26, the company will host a live conference call to discuss the results at 4:30 PM ET.

Investors can stay up-to-date on how these companies performed by checking in on their quarterly earnings releases, listening to their quarterly conference calls, and by staying tuned at The Motley Fool for some post-earnings analysis.

10 stocks we like better than IBM When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and IBM wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 4, 2017

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.