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IBM Q4 Earnings Loom: Buy, Sell or Hold the Stock Ahead of Results?
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Key Takeaways
IBM will report Q4 2025 earnings on Jan. 28, with the consensus estimate at $19.21B in sales and $4.33 EPS.
New AI-driven partnerships with SPGI and MSFT may boost revenue in the Software and Consulting segments.
Despite growth in cloud and AI, IBM faces valuation concerns, competition and margin pressures.
International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2025 earnings on Jan. 28, 2026. The Zacks Consensus Estimate for sales and earnings is pegged at $19.21 billion and $4.33 per share, respectively. Earnings estimates for IBM for 2025 have remained stable at $11.38, while those for 2026 are up 0.3% to $12.19 per share over the past 60 days.
IBM Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The cloud and data platform delivered a four-quarter earnings surprise of 8.1%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 8.6%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
During the fourth quarter, IBM inked a partnership with S&P Global Inc. (SPGI - Free Report) to equip business enterprises with AI-powered tools for effective supply chain management. Per the collaboration, IBM's watsonx Orchestrate agentic framework will be embedded into S&P Global's supply chain and vendor selection tools for key insight and improved visibility. Leveraging S&P Global's proprietary data, research and analytics along with IBM’s AI capabilities, the partnership aims to expedite the decision-making process across supply chain management. These are likely to have generated incremental revenues for the Software segment.
During the to-be-reported quarter, IBM extended its multi-year partnership with Microsoft Corporation (MSFT - Free Report) to augment its consulting capabilities. IBM’s multi-model, multi-framework AI platform, IBM Consulting Advantage, combines IBM expertise and skills to support consultants and clients worldwide with AI assistants, agents and applications. IBM is set to integrate Microsoft’s Copilot with the IBM Consulting Advantage. This will allow IBM-certified consultants to access the IBM AI platform from within Microsoft 365 apps such as Word, Excel, PowerPoint, Teams and Outlook. These are likely to have generated additional revenues for the Consulting segment.
In the third quarter, the company unveiled IBM Quantum Nighthawk – the most advanced quantum processor developed to date. With an architecture that complements high-performing quantum software, IBM Quantum Nighthawk boasts superior qubit connectivity, which enables users to execute circuits with 30% more complexity than its predecessors. IBM 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.
However, despite solid hybrid cloud, quantum technology and AI traction, IBM faces stiff competition from Amazon Web Services and Microsoft’s Azure. The company’s ongoing, heavily time-consuming business model transition to the cloud is a challenging task. Weaknesses in its traditional business and foreign exchange volatility remain significant concerns. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes.
Price Performance
Over the past year, IBM has gained 30.5% compared with the industry’s rise of 93.5%, outperforming peers like Microsoft and Oracle Corporation (ORCL - Free Report) . While Microsoft gained 1.9%, Oracle declined 2.3% over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, IBM appears to be trading at a premium relative to the industry and is trading well above its mean. Going by the price/earnings ratio, the company shares currently trade at 23.8 forward earnings, higher than 17.96 for the industry and the stock’s mean of 14.78.
Image Source: Zacks Investment Research
Investment Considerations
IBM aims to benefit from the increasing propensity of business enterprises to undertake a cloud-agnostic and interoperable approach to secure multi-cloud management with a diligent focus on hybrid cloud and generative AI solutions. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment and quantum computing, 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 to a healthy demand trend.
However, IBM’s frequent acquisitions have escalated integration risks. Buyouts have negatively impacted the company’s balance sheet in the form of high levels of goodwill and net intangible assets. IBM’s margins might have been strained by limited cost-cutting opportunities and stiff competitive pressures, likely delaying key product launches.
End Note
IBM is trading at a premium valuation, and investors could wait for a better entry point to cash in on its long-term fundamentals. With stagnating earnings estimates, the stock is witnessing a period of lull. Consequently, it might not be prudent to bet on the stock at the moment.
However, IBM expects its growth to be driven primarily by analytics, cloud computing and security services. A better business mix, improving operating leverage through productivity gains and increased investments in growth opportunities, will likely be conducive to long-term growth. IBM is poised to benefit from strong demand for hybrid cloud and AI, which will drive growth in the Software and Consulting segments in the long run.
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IBM Q4 Earnings Loom: Buy, Sell or Hold the Stock Ahead of Results?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) is scheduled to report fourth-quarter 2025 earnings on Jan. 28, 2026. The Zacks Consensus Estimate for sales and earnings is pegged at $19.21 billion and $4.33 per share, respectively. Earnings estimates for IBM for 2025 have remained stable at $11.38, while those for 2026 are up 0.3% to $12.19 per share over the past 60 days.
IBM Estimate Trend
Image Source: Zacks Investment Research
Earnings Surprise History
The cloud and data platform delivered a four-quarter earnings surprise of 8.1%, on average, beating estimates on each occasion. In the last reported quarter, the company pulled off an earnings surprise of 8.6%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
IBM currently has an ESP of 0.00% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping Upcoming Results
During the fourth quarter, IBM inked a partnership with S&P Global Inc. (SPGI - Free Report) to equip business enterprises with AI-powered tools for effective supply chain management. Per the collaboration, IBM's watsonx Orchestrate agentic framework will be embedded into S&P Global's supply chain and vendor selection tools for key insight and improved visibility. Leveraging S&P Global's proprietary data, research and analytics along with IBM’s AI capabilities, the partnership aims to expedite the decision-making process across supply chain management. These are likely to have generated incremental revenues for the Software segment.
During the to-be-reported quarter, IBM extended its multi-year partnership with Microsoft Corporation (MSFT - Free Report) to augment its consulting capabilities. IBM’s multi-model, multi-framework AI platform, IBM Consulting Advantage, combines IBM expertise and skills to support consultants and clients worldwide with AI assistants, agents and applications. IBM is set to integrate Microsoft’s Copilot with the IBM Consulting Advantage. This will allow IBM-certified consultants to access the IBM AI platform from within Microsoft 365 apps such as Word, Excel, PowerPoint, Teams and Outlook. These are likely to have generated additional revenues for the Consulting segment.
In the third quarter, the company unveiled IBM Quantum Nighthawk – the most advanced quantum processor developed to date. With an architecture that complements high-performing quantum software, IBM Quantum Nighthawk boasts superior qubit connectivity, which enables users to execute circuits with 30% more complexity than its predecessors. IBM 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.
However, despite solid hybrid cloud, quantum technology and AI traction, IBM faces stiff competition from Amazon Web Services and Microsoft’s Azure. The company’s ongoing, heavily time-consuming business model transition to the cloud is a challenging task. Weaknesses in its traditional business and foreign exchange volatility remain significant concerns. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes.
Price Performance
Over the past year, IBM has gained 30.5% compared with the industry’s rise of 93.5%, outperforming peers like Microsoft and Oracle Corporation (ORCL - Free Report) . While Microsoft gained 1.9%, Oracle declined 2.3% over this period.
Image Source: Zacks Investment Research
Key Valuation Metric
From a valuation standpoint, IBM appears to be trading at a premium relative to the industry and is trading well above its mean. Going by the price/earnings ratio, the company shares currently trade at 23.8 forward earnings, higher than 17.96 for the industry and the stock’s mean of 14.78.
Image Source: Zacks Investment Research
Investment Considerations
IBM aims to benefit from the increasing propensity of business enterprises to undertake a cloud-agnostic and interoperable approach to secure multi-cloud management with a diligent focus on hybrid cloud and generative AI solutions. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment and quantum computing, 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 to a healthy demand trend.
However, IBM’s frequent acquisitions have escalated integration risks. Buyouts have negatively impacted the company’s balance sheet in the form of high levels of goodwill and net intangible assets. IBM’s margins might have been strained by limited cost-cutting opportunities and stiff competitive pressures, likely delaying key product launches.
End Note
IBM is trading at a premium valuation, and investors could wait for a better entry point to cash in on its long-term fundamentals. With stagnating earnings estimates, the stock is witnessing a period of lull. Consequently, it might not be prudent to bet on the stock at the moment.
However, IBM expects its growth to be driven primarily by analytics, cloud computing and security services. A better business mix, improving operating leverage through productivity gains and increased investments in growth opportunities, will likely be conducive to long-term growth. IBM is poised to benefit from strong demand for hybrid cloud and AI, which will drive growth in the Software and Consulting segments in the long run.