IBM will report first-quarter earnings late Wednesday. Despite the S&P 500 and Dow Jones Industrial Average slumping this year, IBM stock has held on to its gains — a trend some on Wall Street expect to continue.
IBM stock has gained 7% year-to-date, outperforming a 10% loss from the S&P 500. Shares of the more than century-old tech company rallied 35% last year, helped by Wall Street's increasing confidence the tech giant can benefit from AI demand. Shares returned to record highs for the first time in a decade.
On the stock market today, IBM stock is up more than 2% at 241.30. IBM hasn't been completely spared from concerns about the broader economy, however. Shares are down 11% from a high of 265.72 reached in early February. IBM stock took a hit last month after technology consulting rival Accenture warned U.S. government business could see slower growth, citing broad federal spending cuts promised by the Trump administration and Elon Musk's DOGE initiative.
But some analysts have noted that IBM historically holds up when markets get choppy.
"IBM remains attractive and has historically outperformed peers in 2000, 2008 and 2020," BofA Securities Wamsi Mohan said in a client note earlier this month. "Additionally, only 10% of their COGS (cost of goods sold) spend is hardware and most of their manufacturing is U.S. based."
Mohan holds a buy rating for IBM stock.
Q1 Expectations
Here's what to watch ahead of IBM's first quarter report:
Overall, analysts polled by FactSet expect IBM to post adjusted earnings of $1.42 per share, down 15% from a year earlier. Analysts project revenue will decrease by fraction year-over-year, to $14.4 billion for the quarter.
IBM's software division is project to have the strongest quarter, with 7.5% year-over-year revenue growth. But that could be weighed down by the 10.2% decrease in infrastructure related sales for revenue that analysts are projecting, according to FactSet. Consulting revenue is also projected to decrease, by 2.6%.
IBM's software division is its largest revenue source, with analysts projecting software sales will account for 44% of IBM's first quarter revenue. Consulting is seen accounting for 35% of sales and infrastructure 19%.
What Wall Street Is Saying About IBM
Ahead of its report, IBM has a buy rating from 12 of the 22 analysts following the stock, according to FactSet. It has neutral calls from six analysts and sell warnings from four analysts. The average target price of 255.50 among all analysts implies about 8% upside from IBM stock's closing price Monday.
Evercore ISI's Amit Daryanani is among the analysts who are bullish on IBM. He told clients on Monday that he expects IBM to perform in-line with consensus estimates for the first quarter, helped by strong software performance.
"We think IBM should fare better vs. peers given their mostly (Fortune 500) customer base and high mix of recurring software/consulting revenue, while we think potential tariff impact within infrastructure should be manageable," Daryanani wrote.
However, he added, "one area of potential softness could be IBM's Consulting segment given federal government spend efficiency efforts (U.S. federal government is roughly 5% of total revenue)."
But "AI tailwinds" for IBM's software business could help offset those concerns, Daryanani wrote.
Morgan Stanley analyst Erik Woodring on Tuesday reiterated a neutral equal-weight call and price target of 237 for IBM stock.
"Amidst a challenging fundamental backdrop, IBM likely maintains safe-haven status with a largely in-line Q1/Q2 and no change to full year guidance," Woodring wrote.
Earlier this month, Woodring and Morgan Stanley's IT sector analysts lowered their price targets for 15 of the 16 stocks they cover in response to President Donald Trump tariffs. IBM was the exception, with the analysts actually increasing their IBM price target to 237 from 228.
The analysts expect IBM can "weather today's volatility," Woodring wrote on April 8, but still see "limited valuation or estimate upside, which keeps us equal-weight rated."
IBM Stock: Bullish 'Blue Dot'
Meanwhile, IBM stock has a "Blue Dot" on its Relative Strength line, according to MarketSurge charts from Investor's Business Daily. Relative Strength measures a stock performance compared with the rest of the market. The RS Line Blue Dot shows strong outperformance vs. the benchmark S&P 500 index.
IBM stock's Relative Strength Rating checks in at 91 out of a best-possible 99, according to IBD Stock Checkup. That indicates IBM stock has outperformed 91% of stocks tracked by IBD over the past 12 months.
Further, IBM stock has an IBD Composite Rating of 82 out a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
