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Can Healthy Software Revenue Growth Benefit IBM's Q1 Earnings?
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Key Takeaways
IBM targets higher Q1 Software revenue as watsonx.ai partnerships and new launches expand use cases.
IBM's Software revenue consensus is $7.04B vs $6.34B a year ago, lifting total revenue expectations.
IBM expects Q1 EPS consensus of $1.81 vs $1.60, though the model doesn't signal a likely beat.
International Business Machines Corporation (IBM - Free Report) is scheduled to report first-quarter 2026 earnings on April 22. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment with a strong focus on product innovation and the growing clout of watsonx.ai across various sectors.
Factors at Play
The Software segment includes Hybrid Cloud (previously reported as Red Hat), Automation and Data and Transaction Processing.
During the first quarter, IBM inked a partnership with ElevenLabs, an AI research and product company, to integrate advanced voice AI (speech-to-text and text-to-speech) into IBM watsonx Orchestrate. The collaboration is expected to boost IBM’s commercial prospects in several industries such as banks, insurance companies, healthcare providers and utilities. The company partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions while strengthening its role as a trusted AI partner for businesses worldwide. These are likely to have generated incremental revenues for the Software segment.
In the quarter under review, IBM extended its collaboration with the organizers of the Masters Tournament to introduce new AI-powered features across the Masters digital platforms, enhancing the fan experience. The company introduced Master's Vault Search, a feature powered by its watsonx platform. It uses AI agents built on Granite small language models and controlled through watsonx Orchestrate to help fans explore more than 50 years of tournament history using simple questions.
IBM partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions (powered by its watsonx Orchestrate), while strengthening its role as a trusted AI partner for businesses worldwide. The platform offers more than 500 tools and customizable AI agents that help employees and auditors quickly find, understand and act on legal, regulatory and compliance information. These are likely to have generated incremental revenues for the Software segment.
In the first quarter, IBM unveiled Sovereign Core, an AI-ready software designed to help enterprises, governments and service providers build and manage secure, self-controlled technology environments with sovereignty at its core. Built on Red Hat’s open-source foundation, IBM’s Sovereign Core provides organizations with built-in control over their platforms and AI systems, using always-on security, local control planes and continuous observance without relying on contracts or external providers. It also supports secure, scalable AI operations by enabling organizations to run and govern AI models locally while efficiently managing identity, access and compliance across large environments.
During the quarter, IBM completed the buyout of Confluent, Inc., a leading provider of an open-source enterprise data streaming platform. The deal has brought real-time data across IBM’s platforms, creating a unified data foundation that allows AI models, agents and automated workflows to operate with up-to-date context across on-premises, cloud and hybrid environments. The buyout has enabled IBM to build a scalable ecosystem to support next-generation digital operations. It also positions IBM to lead AI-driven enterprises by enabling smarter, faster and more robust business processes with real-time data.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7.04 billion, indicating an improvement from $6.34 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company stands at $15.65 billion. It generated revenues of $14.54 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.81 per share, indicating growth from $1.6 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM for the first 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.
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Lumen Technologies, Inc. (LUMN - Free Report) is set to release quarterly numbers on May 5. It has an Earnings ESP of +27.27% and sports a Zacks Rank #1.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +2.79% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on May 5.
The Earnings ESP for Alphabet Inc. (GOOGL - Free Report) is +1.53% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on April 29.
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Can Healthy Software Revenue Growth Benefit IBM's Q1 Earnings?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) is scheduled to report first-quarter 2026 earnings on April 22. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment with a strong focus on product innovation and the growing clout of watsonx.ai across various sectors.
Factors at Play
The Software segment includes Hybrid Cloud (previously reported as Red Hat), Automation and Data and Transaction Processing.
During the first quarter, IBM inked a partnership with ElevenLabs, an AI research and product company, to integrate advanced voice AI (speech-to-text and text-to-speech) into IBM watsonx Orchestrate. The collaboration is expected to boost IBM’s commercial prospects in several industries such as banks, insurance companies, healthcare providers and utilities. The company partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions while strengthening its role as a trusted AI partner for businesses worldwide. These are likely to have generated incremental revenues for the Software segment.
In the quarter under review, IBM extended its collaboration with the organizers of the Masters Tournament to introduce new AI-powered features across the Masters digital platforms, enhancing the fan experience. The company introduced Master's Vault Search, a feature powered by its watsonx platform. It uses AI agents built on Granite small language models and controlled through watsonx Orchestrate to help fans explore more than 50 years of tournament history using simple questions.
IBM partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions (powered by its watsonx Orchestrate), while strengthening its role as a trusted AI partner for businesses worldwide. The platform offers more than 500 tools and customizable AI agents that help employees and auditors quickly find, understand and act on legal, regulatory and compliance information. These are likely to have generated incremental revenues for the Software segment.
In the first quarter, IBM unveiled Sovereign Core, an AI-ready software designed to help enterprises, governments and service providers build and manage secure, self-controlled technology environments with sovereignty at its core. Built on Red Hat’s open-source foundation, IBM’s Sovereign Core provides organizations with built-in control over their platforms and AI systems, using always-on security, local control planes and continuous observance without relying on contracts or external providers. It also supports secure, scalable AI operations by enabling organizations to run and govern AI models locally while efficiently managing identity, access and compliance across large environments.
During the quarter, IBM completed the buyout of Confluent, Inc., a leading provider of an open-source enterprise data streaming platform. The deal has brought real-time data across IBM’s platforms, creating a unified data foundation that allows AI models, agents and automated workflows to operate with up-to-date context across on-premises, cloud and hybrid environments. The buyout has enabled IBM to build a scalable ecosystem to support next-generation digital operations. It also positions IBM to lead AI-driven enterprises by enabling smarter, faster and more robust business processes with real-time data.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7.04 billion, indicating an improvement from $6.34 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company stands at $15.65 billion. It generated revenues of $14.54 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.81 per share, indicating growth from $1.6 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM for the first 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 -0.74% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Lumen Technologies, Inc. (LUMN - Free Report) is set to release quarterly numbers on May 5. It has an Earnings ESP of +27.27% and sports a Zacks Rank #1.
The Earnings ESP for Arista Networks, Inc. (ANET - Free Report) is +2.79% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on May 5.
The Earnings ESP for Alphabet Inc. (GOOGL - Free Report) is +1.53% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on April 29.