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Can IBM's Tie-Up With Cisco for Quantum Network Aid Its Shares?
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Key Takeaways
IBM and CSCO will jointly develop a fault-tolerant quantum computing network by 2030.
IBM's QNU will connect QPUs, while CSCO builds a high-speed protocol to transfer quantum data.
IBM's 2025 EPS estimate rose 7.1% as its quantum and AI strategies boost investor confidence.
International Business Machines Corporation (IBM - Free Report) has collaborated with Cisco Systems, Inc. (CSCO - Free Report) to develop a connected network of fault-tolerant quantum computers by 2030. The companies aim to pool their individual resources and key expertise to create a pathway toward an exponentially large computational space, leading to the formation of a quantum computing Internet. This is likely to create a platform where many distributed quantum-based technologies, such as quantum computers, quantum sensors and quantum communications, are connected to share information across distances.
As part of this collaborative effort, IBM intends to develop a quantum networking unit (QNU) to serve as the interface linking several quantum computers to a quantum processing unit (QPU). This will facilitate the conversion of stationary quantum information in the QPU into "flying" quantum information for transfer across potentially multiple quantum computers through a network. Cisco is developing a high-speed software protocol framework that can continuously and dynamically reconfigure network paths to drive the quantum information transfer required for a given quantum algorithm or application.
Leveraging Cisco quantum network nodes, various IBM QPUs within a data center are likely to be linked through the QNU interface. This is expected to be extended across multiple data centers to scale a larger quantum network to form the groundwork for a quantum computing Internet. As users seek to achieve quantum advantage — where quantum computers outperform the classical ones — the quantum computing network could pave the way for technological innovations across the quantum ecosystem.
IBM Focusing on Quantum Computing
IBM had earlier inked a partnership with Advanced Micro Devices, Inc. (AMD - Free Report) to develop scalable, open-source platforms that could redefine the future of computing. Together, the companies aim to develop next-generation computing architectures, known as quantum-centric supercomputing, which enable users to increase the complexity of algorithms in the quantum hardware.
IBM has made significant updates to Qiskit, its widely used quantum software platform. The latest version has scaled dynamic circuit capabilities to deliver a 24% increase in accuracy at the scale of 100+ qubits, giving developers more control than ever before. IBM is also extending Qiskit with a new execution model that enables fine-grained control with accelerated error mitigation capabilities that significantly reduce the cost of extracting accurate results.
Price Performance
Riding on such novel initiatives, IBM has surged 35.7% over the past year compared with the industry’s growth of 61.2%, outperforming peers like Amazon.com, Inc. (AMZN - Free Report) and Microsoft Corporation (MSFT - Free Report) . While Amazon has jumped 10.7%, Microsoft gained 14.1% over this period.
Image Source: Zacks Investment Research
Estimate Revision Trend for IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for IBM for 2025 have moved up 7.1% to $11.39 over the past year, while the same for 2026 has increased 8.8% to $12.23. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
IBM Remains Plagued by Margin Woes
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon Web Services and Microsoft Azure. Increasing pricing pressure is eroding margins and profitability has trended down over the years, barring occasional spikes. The company’s ongoing, heavily time-consuming business model transition to the cloud is a challenging task. Weakness in its traditional business and foreign exchange volatility remains a significant concern.
IBM is resorting to massive job cuts to reduce operating costs. A significant part of these jobs is slated to be shifted to India under a “resource action” plan, an ongoing corporate strategy to tap the vast talent pool of the subcontinent at lower operating costs. Although the company spokesperson has refused to comment on the grapevines and commit an exact figure for the layoffs, various unidentified sources have confirmed that the action has already started, impacting employees from consulting, corporate social responsibility, cloud infrastructure, sales and internal systems teams.
Image Source: Zacks Investment Research
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, IBM is witnessing a steady growth curve. A strong emphasis on quantum computing, hybrid cloud and an AI focus are driving value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
However, IBM’s growth is dented by high operating costs and stiff competition that reduce its profitability. With a Zacks Rank #3 (Hold), IBM appears to be treading in the middle of the road, and new investors can be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Can IBM's Tie-Up With Cisco for Quantum Network Aid Its Shares?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) has collaborated with Cisco Systems, Inc. (CSCO - Free Report) to develop a connected network of fault-tolerant quantum computers by 2030. The companies aim to pool their individual resources and key expertise to create a pathway toward an exponentially large computational space, leading to the formation of a quantum computing Internet. This is likely to create a platform where many distributed quantum-based technologies, such as quantum computers, quantum sensors and quantum communications, are connected to share information across distances.
As part of this collaborative effort, IBM intends to develop a quantum networking unit (QNU) to serve as the interface linking several quantum computers to a quantum processing unit (QPU). This will facilitate the conversion of stationary quantum information in the QPU into "flying" quantum information for transfer across potentially multiple quantum computers through a network. Cisco is developing a high-speed software protocol framework that can continuously and dynamically reconfigure network paths to drive the quantum information transfer required for a given quantum algorithm or application.
Leveraging Cisco quantum network nodes, various IBM QPUs within a data center are likely to be linked through the QNU interface. This is expected to be extended across multiple data centers to scale a larger quantum network to form the groundwork for a quantum computing Internet. As users seek to achieve quantum advantage — where quantum computers outperform the classical ones — the quantum computing network could pave the way for technological innovations across the quantum ecosystem.
IBM Focusing on Quantum Computing
IBM had earlier inked a partnership with Advanced Micro Devices, Inc. (AMD - Free Report) to develop scalable, open-source platforms that could redefine the future of computing. Together, the companies aim to develop next-generation computing architectures, known as quantum-centric supercomputing, which enable users to increase the complexity of algorithms in the quantum hardware.
IBM has made significant updates to Qiskit, its widely used quantum software platform. The latest version has scaled dynamic circuit capabilities to deliver a 24% increase in accuracy at the scale of 100+ qubits, giving developers more control than ever before. IBM is also extending Qiskit with a new execution model that enables fine-grained control with accelerated error mitigation capabilities that significantly reduce the cost of extracting accurate results.
Price Performance
Riding on such novel initiatives, IBM has surged 35.7% over the past year compared with the industry’s growth of 61.2%, outperforming peers like Amazon.com, Inc. (AMZN - Free Report) and Microsoft Corporation (MSFT - Free Report) . While Amazon has jumped 10.7%, Microsoft gained 14.1% over this period.
Image Source: Zacks Investment Research
Estimate Revision Trend for IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for IBM for 2025 have moved up 7.1% to $11.39 over the past year, while the same for 2026 has increased 8.8% to $12.23. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
IBM Remains Plagued by Margin Woes
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon Web Services and Microsoft Azure. Increasing pricing pressure is eroding margins and profitability has trended down over the years, barring occasional spikes. The company’s ongoing, heavily time-consuming business model transition to the cloud is a challenging task. Weakness in its traditional business and foreign exchange volatility remains a significant concern.
IBM is resorting to massive job cuts to reduce operating costs. A significant part of these jobs is slated to be shifted to India under a “resource action” plan, an ongoing corporate strategy to tap the vast talent pool of the subcontinent at lower operating costs. Although the company spokesperson has refused to comment on the grapevines and commit an exact figure for the layoffs, various unidentified sources have confirmed that the action has already started, impacting employees from consulting, corporate social responsibility, cloud infrastructure, sales and internal systems teams.
Image Source: Zacks Investment Research
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, IBM is witnessing a steady growth curve. A strong emphasis on quantum computing, hybrid cloud and an AI focus are driving value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
However, IBM’s growth is dented by high operating costs and stiff competition that reduce its profitability. With a Zacks Rank #3 (Hold), IBM appears to be treading in the middle of the road, and new investors can be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.