We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can the Software Segment Remain a Key Growth Driver for IBM?
Read MoreHide Full Article
Key Takeaways
IBM Software revenue growth is driven by hybrid cloud adoption and product innovation.
Acquisitions like HashiCorp, StreamSets and webMethods strengthen IBM's cloud and AI platforms.
IBM shares are up 23% in a year, with rising 2025 earnings estimates supporting momentum.
Over the years, International Business Machines Corporation’s (IBM - Free Report) Software segment has recorded healthy revenue growth backed by a strong focus on product innovation and a growing adoption of its hybrid cloud services. The Software segment includes Hybrid Cloud (previously reported as Red Hat), Automation, Data and Transaction Processing businesses. The addition of cutting-edge products has significantly improved IBM Software’s ability to help organizations optimize IT spending, reduce cloud costs and boost overall efficiency through automation.
With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This has led to a healthy demand for the hybrid cloud services of IBM.
The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. Moreover, HashiCorp’s tool sets complement IBM Red Hat’s portfolio, bringing additional functionalities for cloud infrastructure management. The integration of HashiCorp’s cloud software capabilities has bolstered IBM’s hybrid multi-cloud approach. In addition, IBM has completed the acquisitions of StreamSets and webMethods from Software AG to augment its AI platform and automation capabilities. The buyouts bring together leading capabilities in integration, API management and data ingestion. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts have enabled IBM to develop comprehensive application and data integration platforms in the industry.
Some Tech Firms Focusing on Hybrid Cloud
Microsoft Corporation (MSFT - Free Report) has doubled down on the cloud computing opportunity. Azure’s increased availability in more than 60 announced regions globally has strengthened Microsoft's competitive position in the cloud computing market. Operating through a vast network of global data centers that ensure high availability and reliability for applications, Azure offers seamless access to all services included in the portal once customers subscribe to it. Subscribers can use these services to create cloud-based resources, such as virtual machines and databases, which can then be assembled into running environments used to host workloads and store data.
Amazon.com, Inc. (AMZN - Free Report) enjoys a dominant position in the cloud-computing market, particularly in the IaaS space, thanks to Amazon Web Services (“AWS”), which is one of its high-margin-generating businesses. AWS is the world’s most comprehensive and broadly adopted on-demand cloud computing platform, offering more than 200 fully featured services from data centers globally. Millions of customers, including the fastest-growing startups, largest enterprises and leading government agencies, are using AWS to lower costs, become more agile and innovate faster. It reportedly offers the widest variety of databases that are purpose-built for different types of applications to enable subscribers to choose the right tool for the job.
IBM’s Price Performance, Valuation and Estimates
IBM has surged 23% over the past year compared with the industry’s growth of 25.5%.
Image Source: Zacks Investment Research
From a valuation standpoint, IBM trades at a forward price-to-sales ratio of 3.67, below the industry tally of 3.90.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IBM’s earnings for 2025 has increased over the past 60 days.
Image: Bigstock
Can the Software Segment Remain a Key Growth Driver for IBM?
Key Takeaways
Over the years, International Business Machines Corporation’s (IBM - Free Report) Software segment has recorded healthy revenue growth backed by a strong focus on product innovation and a growing adoption of its hybrid cloud services. The Software segment includes Hybrid Cloud (previously reported as Red Hat), Automation, Data and Transaction Processing businesses. The addition of cutting-edge products has significantly improved IBM Software’s ability to help organizations optimize IT spending, reduce cloud costs and boost overall efficiency through automation.
With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This has led to a healthy demand for the hybrid cloud services of IBM.
The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. Moreover, HashiCorp’s tool sets complement IBM Red Hat’s portfolio, bringing additional functionalities for cloud infrastructure management. The integration of HashiCorp’s cloud software capabilities has bolstered IBM’s hybrid multi-cloud approach. In addition, IBM has completed the acquisitions of StreamSets and webMethods from Software AG to augment its AI platform and automation capabilities. The buyouts bring together leading capabilities in integration, API management and data ingestion. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts have enabled IBM to develop comprehensive application and data integration platforms in the industry.
Some Tech Firms Focusing on Hybrid Cloud
Microsoft Corporation (MSFT - Free Report) has doubled down on the cloud computing opportunity. Azure’s increased availability in more than 60 announced regions globally has strengthened Microsoft's competitive position in the cloud computing market. Operating through a vast network of global data centers that ensure high availability and reliability for applications, Azure offers seamless access to all services included in the portal once customers subscribe to it. Subscribers can use these services to create cloud-based resources, such as virtual machines and databases, which can then be assembled into running environments used to host workloads and store data.
Amazon.com, Inc. (AMZN - Free Report) enjoys a dominant position in the cloud-computing market, particularly in the IaaS space, thanks to Amazon Web Services (“AWS”), which is one of its high-margin-generating businesses. AWS is the world’s most comprehensive and broadly adopted on-demand cloud computing platform, offering more than 200 fully featured services from data centers globally. Millions of customers, including the fastest-growing startups, largest enterprises and leading government agencies, are using AWS to lower costs, become more agile and innovate faster. It reportedly offers the widest variety of databases that are purpose-built for different types of applications to enable subscribers to choose the right tool for the job.
IBM’s Price Performance, Valuation and Estimates
IBM has surged 23% over the past year compared with the industry’s growth of 25.5%.
Image Source: Zacks Investment Research
From a valuation standpoint, IBM trades at a forward price-to-sales ratio of 3.67, below the industry tally of 3.90.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IBM’s earnings for 2025 has increased over the past 60 days.
Image Source: Zacks Investment Research
IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.