IBM's Quantum Computing and AI Strategy Outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 hour ago
0mins
Should l Buy IBM?
Source: Fool
- Quantum Computing Investment: IBM has been investing in quantum computing hardware and software for decades, aiming to achieve 'quantum advantage' by the end of 2026, although it remains a non-major growth driver in the short term.
- Software Revenue Growth: In Q4, IBM's software revenue rose 14% year-over-year to $9 billion, with software now accounting for nearly 46% of total revenue, highlighting the company's shift towards a software-led model that enhances financial stability.
- Strong Free Cash Flow: IBM generated $14.7 billion in free cash flow in fiscal 2025 and expects nearly $15.7 billion in 2026, providing ample financial flexibility to support dividends and acquisitions.
- AI Platform Strategy: IBM's cumulative generative AI business is valued at over $12.5 billion, with management referring to the company as a 'software-led, hybrid cloud and AI platform' firm, indicating strong growth potential in enterprise AI deployments, particularly in hybrid cloud environments.
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Analyst Views on IBM
Wall Street analysts forecast IBM stock price to rise
16 Analyst Rating
11 Buy
4 Hold
1 Sell
Moderate Buy
Current: 223.350
Low
210.00
Averages
315.80
High
375.00
Current: 223.350
Low
210.00
Averages
315.80
High
375.00
About IBM
International Business Machines Corporation is a provider of global hybrid cloud and artificial intelligence (AI) and consulting expertise. The Company’s segments include Software, Consulting, Infrastructure and Financing. The Software segment includes hybrid cloud and AI platforms, which allow clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The Consulting segment focuses on integrating skills on strategy, experience, technology and operations by domain and industry. The Infrastructure segment is focused on the hybrid cloud infrastructure market, providing on-premises and cloud-based server and storage solutions. In addition, it offers a portfolio of life-cycle services for hybrid cloud infrastructure deployment. The Financing segment provides client and commercial financing, facilitating its clients’ acquisition of hardware, software and services. It helps clients in more than 175 countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
IBM's Quantum Computing and AI Strategy Outlook
- Quantum Computing Investment: IBM has been investing in quantum computing hardware and software for decades, aiming to achieve 'quantum advantage' by the end of 2026, although it remains a non-major growth driver in the short term.
- Software Revenue Growth: In Q4, IBM's software revenue rose 14% year-over-year to $9 billion, with software now accounting for nearly 46% of total revenue, highlighting the company's shift towards a software-led model that enhances financial stability.
- Strong Free Cash Flow: IBM generated $14.7 billion in free cash flow in fiscal 2025 and expects nearly $15.7 billion in 2026, providing ample financial flexibility to support dividends and acquisitions.
- AI Platform Strategy: IBM's cumulative generative AI business is valued at over $12.5 billion, with management referring to the company as a 'software-led, hybrid cloud and AI platform' firm, indicating strong growth potential in enterprise AI deployments, particularly in hybrid cloud environments.
See More
IBM's Quantum Computing Business Limited for Near-Term Growth
- Software Revenue Growth: IBM's software revenue increased by 14% year-over-year to $9 billion in Q4, with software now accounting for nearly 46% of total revenue, indicating a strategic shift towards a software-led model that enhances market competitiveness.
- Strong Free Cash Flow: The company generated $14.7 billion in free cash flow in fiscal 2025 and expects nearly $15.7 billion in 2026, providing ample financial flexibility to support dividends and acquisitions, thereby strengthening its financial foundation.
- Quantum Computing Progress: IBM aims to achieve 'quantum advantage' by the end of 2026 and develop a large-scale fault-tolerant computer by 2029; while quantum computing is not a near-term growth catalyst, its long-term potential remains significant.
- AI-Driven Growth Engine: IBM's cumulative generative AI business is valued at over $12.5 billion, including $2 billion in software and over $10.5 billion in consulting, indicating a rapid transformation as clients shift from experimentation to real-time AI deployments.
See More
IBM Releases 2026 X-Force Threat Intelligence Index Highlighting Cybersecurity Trends
- Surge in Cyber Attacks: The IBM X-Force report indicates a 44% increase in attacks exploiting public-facing applications in 2025, primarily due to missing authentication controls and AI-driven vulnerability discovery, placing greater security pressure on businesses.
- Rise in Ransomware Activity: Active ransomware and extortion groups surged by 49% year-over-year, indicating increased fragmentation in the cyber ecosystem, while publicly disclosed victim counts rose by approximately 12%, necessitating enhanced defensive measures from enterprises.
- Escalating Supply Chain Risks: Large supply chain and third-party compromises nearly quadrupled since 2020, as attackers exploit trust relationships and CI/CD automation, leading to heightened risks in software development and deployment environments for businesses.
- AI Accelerating Attack Lifecycle: Attackers are leveraging AI to speed up research and attack path analysis, particularly with North Korean IT workers using AI for synthetic identities and global market interactions, highlighting the growing significance of AI in cyber attacks.
See More
UBS Upgrades IBM Rating to Neutral Amidst Market Concerns
- Rating Upgrade: UBS upgraded IBM's stock rating from 'sell' to 'neutral', indicating that concerns over its COBOL modernization business are overstated, with analysts suggesting that the new tool poses limited threats and may only complement IBM's existing services.
- Stock Price Recovery: Following a sharp 13.2% drop on Monday due to competitive fears, IBM's shares rose 2.7% on Tuesday and gained an additional 0.7% in after-hours trading, reflecting a gradual restoration of market confidence in its outlook.
- Strong Retail Sentiment: As of late Tuesday, retail sentiment on Stocktwits for IBM remained 'extremely bullish', with users generally agreeing that Monday's selloff was excessive and predicting an 80% stock price increase by year-end.
- Market Competition Analysis: While Anthropic's new tool is seen as suitable for smaller firms, major banks, insurers, and governments continue to prefer IBM's platform for its risk controls and integration capabilities, underscoring IBM's dominant position in COBOL workloads.
See More
Asia-Pacific Markets Set for Gains Driven by Tech Stocks
- Tech Stock Rally: Following a tech-driven rally in U.S. markets, Asia-Pacific markets are poised for gains, with Australia's S&P/ASX 200 climbing 0.76% in early trading, indicating a rebound in investor confidence.
- Strong Opening for Japan: Japan's Nikkei 225 futures are reported at 58,140 in Chicago, up from the previous close of 57,321.09, suggesting a robust market opening and reflecting optimism about economic recovery.
- AMD and Meta Partnership: AMD shares surged 8.8% after Meta announced a multi-year deal to deploy up to 6 gigawatts of AMD's GPUs for AI data centers, highlighting strong demand in the semiconductor sector.
- U.S. Market Gains: The S&P 500 rose 0.77% to 6,890.07, while the Nasdaq Composite increased by 1.04% to 22,863.68, demonstrating strong support for tech stocks, particularly following Home Depot's earnings beat expectations.
See More
US Equity Benchmarks Post Largest One-Day Gains in Over Two Weeks
- Market Rebound: Major US equity benchmarks recorded their largest one-day gains in over two weeks on Tuesday, indicating a significant improvement in market sentiment likely driven by investor optimism regarding economic recovery.
- Increased Trading Volume: The rise in the stock market was accompanied by a notable increase in trading volume, suggesting heightened investor participation, which may signal a restoration of market confidence and potential for further gains ahead.
- Sector Performance Divergence: While the overall market rose, different sectors exhibited varied performances, with technology and consumer goods stocks leading the gains, reflecting investor preferences for specific industries and the diversity of market choices.
- Economic Data Impact: The market rebound may have been influenced by recent positive economic data, enhancing investor expectations for future economic growth, thereby driving stock prices higher and improving overall market sentiment.
See More
IBM's Quantum Computing and AI Strategy Outlook
- Quantum Computing Investment: IBM has been investing in quantum computing hardware and software for decades, aiming to achieve 'quantum advantage' by the end of 2026, although it remains a non-major growth driver in the short term.
- Software Revenue Growth: In Q4, IBM's software revenue rose 14% year-over-year to $9 billion, with software now accounting for nearly 46% of total revenue, highlighting the company's shift towards a software-led model that enhances financial stability.
- Strong Free Cash Flow: IBM generated $14.7 billion in free cash flow in fiscal 2025 and expects nearly $15.7 billion in 2026, providing ample financial flexibility to support dividends and acquisitions.
- AI Platform Strategy: IBM's cumulative generative AI business is valued at over $12.5 billion, with management referring to the company as a 'software-led, hybrid cloud and AI platform' firm, indicating strong growth potential in enterprise AI deployments, particularly in hybrid cloud environments.
See More
IBM's Quantum Computing Business Limited for Near-Term Growth
- Software Revenue Growth: IBM's software revenue increased by 14% year-over-year to $9 billion in Q4, with software now accounting for nearly 46% of total revenue, indicating a strategic shift towards a software-led model that enhances market competitiveness.
- Strong Free Cash Flow: The company generated $14.7 billion in free cash flow in fiscal 2025 and expects nearly $15.7 billion in 2026, providing ample financial flexibility to support dividends and acquisitions, thereby strengthening its financial foundation.
- Quantum Computing Progress: IBM aims to achieve 'quantum advantage' by the end of 2026 and develop a large-scale fault-tolerant computer by 2029; while quantum computing is not a near-term growth catalyst, its long-term potential remains significant.
- AI-Driven Growth Engine: IBM's cumulative generative AI business is valued at over $12.5 billion, including $2 billion in software and over $10.5 billion in consulting, indicating a rapid transformation as clients shift from experimentation to real-time AI deployments.
See More
IBM Releases 2026 X-Force Threat Intelligence Index Highlighting Cybersecurity Trends
- Surge in Cyber Attacks: The IBM X-Force report indicates a 44% increase in attacks exploiting public-facing applications in 2025, primarily due to missing authentication controls and AI-driven vulnerability discovery, placing greater security pressure on businesses.
- Rise in Ransomware Activity: Active ransomware and extortion groups surged by 49% year-over-year, indicating increased fragmentation in the cyber ecosystem, while publicly disclosed victim counts rose by approximately 12%, necessitating enhanced defensive measures from enterprises.
- Escalating Supply Chain Risks: Large supply chain and third-party compromises nearly quadrupled since 2020, as attackers exploit trust relationships and CI/CD automation, leading to heightened risks in software development and deployment environments for businesses.
- AI Accelerating Attack Lifecycle: Attackers are leveraging AI to speed up research and attack path analysis, particularly with North Korean IT workers using AI for synthetic identities and global market interactions, highlighting the growing significance of AI in cyber attacks.
See More
UBS Upgrades IBM Rating to Neutral Amidst Market Concerns
- Rating Upgrade: UBS upgraded IBM's stock rating from 'sell' to 'neutral', indicating that concerns over its COBOL modernization business are overstated, with analysts suggesting that the new tool poses limited threats and may only complement IBM's existing services.
- Stock Price Recovery: Following a sharp 13.2% drop on Monday due to competitive fears, IBM's shares rose 2.7% on Tuesday and gained an additional 0.7% in after-hours trading, reflecting a gradual restoration of market confidence in its outlook.
- Strong Retail Sentiment: As of late Tuesday, retail sentiment on Stocktwits for IBM remained 'extremely bullish', with users generally agreeing that Monday's selloff was excessive and predicting an 80% stock price increase by year-end.
- Market Competition Analysis: While Anthropic's new tool is seen as suitable for smaller firms, major banks, insurers, and governments continue to prefer IBM's platform for its risk controls and integration capabilities, underscoring IBM's dominant position in COBOL workloads.
See More
Asia-Pacific Markets Set for Gains Driven by Tech Stocks
- Tech Stock Rally: Following a tech-driven rally in U.S. markets, Asia-Pacific markets are poised for gains, with Australia's S&P/ASX 200 climbing 0.76% in early trading, indicating a rebound in investor confidence.
- Strong Opening for Japan: Japan's Nikkei 225 futures are reported at 58,140 in Chicago, up from the previous close of 57,321.09, suggesting a robust market opening and reflecting optimism about economic recovery.
- AMD and Meta Partnership: AMD shares surged 8.8% after Meta announced a multi-year deal to deploy up to 6 gigawatts of AMD's GPUs for AI data centers, highlighting strong demand in the semiconductor sector.
- U.S. Market Gains: The S&P 500 rose 0.77% to 6,890.07, while the Nasdaq Composite increased by 1.04% to 22,863.68, demonstrating strong support for tech stocks, particularly following Home Depot's earnings beat expectations.
See More
US Equity Benchmarks Post Largest One-Day Gains in Over Two Weeks
- Market Rebound: Major US equity benchmarks recorded their largest one-day gains in over two weeks on Tuesday, indicating a significant improvement in market sentiment likely driven by investor optimism regarding economic recovery.
- Increased Trading Volume: The rise in the stock market was accompanied by a notable increase in trading volume, suggesting heightened investor participation, which may signal a restoration of market confidence and potential for further gains ahead.
- Sector Performance Divergence: While the overall market rose, different sectors exhibited varied performances, with technology and consumer goods stocks leading the gains, reflecting investor preferences for specific industries and the diversity of market choices.
- Economic Data Impact: The market rebound may have been influenced by recent positive economic data, enhancing investor expectations for future economic growth, thereby driving stock prices higher and improving overall market sentiment.
See More
