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International Business Machines Corporation (IBM), headquartered in Armonk, New York, is a global technology leader with a market cap of $209.4 billion. Known for its cutting-edge work in artificial intelligence, cloud computing, and enterprise solutions, IBM delivers a broad portfolio of software, services, and hardware designed to drive digital transformation for businesses. The company is scheduled to report its Q1 earnings after the market closes on Wednesday, Apr. 23.
Ahead of the event, analysts predict IBM’s bottom line will decline 15.5% year over year to $1.42 per share. On the bright side, the company has consistently outpaced Wall Street’s EPS estimates in its last four quarterly reports. Its adjusted earnings of $3.92 per share for the last quarter surpassed the consensus estimate by 5.1%, driven by strong growth in its software and consulting segments. The company benefited from increased enterprise demand for hybrid cloud solutions and AI-powered services, which helped offset softness in its infrastructure business.
For the current year, analysts expect IBM to report an EPS of $10.76, which is up 4.2% from $10.33 in fiscal 2024. Its EPS is projected to rise 7.6% annually to $11.58 in fiscal 2026.
Despite the volatility in the market, IBM stock has soared 16.4% over the past year, outperforming the broader S&P 500 Index's ($SPX) 4.2% gains and the Vanguard Information Technology ETF’s (VGT) 24.4% returns over the same time frame.
IBM shares rose 13% in the first quarter of the year, outperforming the broader market despite a minor dip from April's tariff concerns. The rally was fueled by strong Q4 results and growing demand for its WatsonX generative AI platform and Red Hat segment. A $5 billion AI deal pipeline and a new cloud research center in Romania, launched in partnership with AWS, further lifted investor sentiment.
However, IBM shares dropped 6% on Mar. 20 following news that the U.S. government would cancel certain consulting contracts, sparking a sell-off in consulting stocks.
The consensus opinion on IBM stock is cautiously bullish, with an overall “Moderate Buy” rating. Among the 19 analysts covering the stock, seven advise a “Strong Buy” rating, one suggests a “Moderate Buy,” nine suggest a “Hold,” and two advise a “Strong Sell.” IBM's average analyst price target is $252.06, which implies a potential upswing of 14% from prevailing market prices.
