It has been about a month since the last earnings report for IBM (IBM – Free Report) . Shares have added about 7.9% in that time frame, underperforming the S&P 500.UnsplashWill the recent positive trend continue leading up to its next earnings release, or is IBM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. IBM Beats Q3 Earnings Estimates on Resilient Cloud DemandIBM reported mixed third-quarter 2023 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. However, the company witnessed healthy demand for hybrid cloud and AI solutions with a client-focused portfolio and broad-based growth. Net IncomeOn a GAAP basis, net income from continuing operations was $1,714 million or $1.86 per share against a net loss of $3,214 million or a loss of $3.55 per share in the year-ago quarter. The improvement in GAAP earnings was primarily attributable to top-line growth and lower operating expenses.Excluding non-recurring items, non-GAAP net income from continuing operations was $2.20 per share compared with $1.81 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 8 cents. Quarter DetailsQuarterly total revenues increased to $14,752 million from $14,107 million on strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments. On a constant currency basis, revenues were up 3.5% year over year. The top line, however, missed the consensus estimate of $14,771 million.Gross profit was $8,023 million compared with $7,430 million in the prior-year quarter, resulting in respective gross margins of 54.4% and 52.7% owing to a strong portfolio mix. Total expenses decreased to $6,150 million from $11,931 million, driven by improvement in the business mix and ongoing productivity initiatives. Segmental PerformanceSoftware: Revenues improved to $6,265 million from $5,811 million, driven by growth in Hybrid Platform & Solutions, Red Hat, Automation, Data & AI and Transaction Processing. The reported segment revenues exceeded our estimate of $6,164 million owing to solid hybrid cloud traction. Segment pre-tax income from continuing operations was $1,486 million compared with $1,306 million in the year-ago quarter for respective margins of 23.7% and 22.5%. The company is witnessing healthy hybrid cloud adoption by clients and solid demand trends across RedHat, automation and Data & AI.Consulting: Revenues were $4,963 million, up from $4,700 million, led by pervasive growth driven by demand for digital transformation, increasing revenues across all business lines and regions. The reported segment revenues missed our estimate of $5,064 million. Segment pre-tax income was $509 million compared with $462 million in the year-ago quarter, driven by productivity enhancement initiatives for respective margins of 10.2% and 9.8%.Infrastructure: Revenues were $3,272 million, down from $3,352 million, owing to lower demand for Distributed Infrastructure and support services. Segment pre-tax income was $387 million compared with $280 million in the year-ago quarter for respective margins of 11.8% and 8.3%.Financing: Revenues improved to $186 million from $174 million. Segment pre-tax income was $91 million compared with $79 million in the year-ago quarter for respective margins of 49.2% and 45.4%. Cash Flow & LiquidityDuring the third quarter, IBM generated $3,055 million in cash from operations compared with $1,901 million in the year-ago quarter, bringing the respective tallies for the first nine months of 2023 and 2022 to $9,468 million and $6,470 million. Free cash flow was $1,682 million in the quarter, up from $752 million in the prior-year period, driven by higher profit and working capital efficiencies. As of Sep 30, 2023, the company had $7,257 million in cash and cash equivalents with $48,828 million of long-term debt. OutlookFor full-year 2023, the company expects 3-5% revenue growth on a constant currency basis. Free cash flow is estimated to be approximately $10.5 billion.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates review.VGM ScoresAt this time, IBM has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren’t focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, IBM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.More By This Author:Alcoa Stock Declines While Market Improves: Some Information for Investors3 Dividend-Paying P&C Insurers That Promise Steady ReturnsAirline Stock Roundup: United Airlines’ Tulum Flight Announcement, Allegiant’s October Traffic