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Can Healthy Increase in Software Revenues Benefit IBM's Q3 Earnings?
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Key Takeaways
IBM's Q3 software revenues are projected to rise to $7.62 billion from $7.21B in the year-ago quarter.
IBM's $240M Together AI deal aims to expand cloud infrastructure and support growing enterprise AI demand.
IBM's AI innovations and cybersecurity collaborations could boost software growth and commercial prospects.
International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2026 earnings after the closing bell on Oct. 21. In the 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, Automation and Data and Transaction Processing.
During the third quarter, IBM entered into a multi-year, $240 million agreement with Together AI to support the growing demand for enterprise artificial intelligence (AI) inference. The partnership will enable IBM to expand its cloud infrastructure offerings for open-source AI workloads and strengthen its position in the rapidly growing AI infrastructure market. Under the agreement, the company plans to deploy a large cluster of NVIDIA's HGX B300 systems on IBM Cloud and provide Together AI with enterprise-grade cloud infrastructure powered by NVIDIA’s advanced computing and Spectrum-X Ethernet networking technologies.
The deployment is designed to support high-performance AI inference and make large-scale workloads more cost-effective. The collaboration also expands IBM’s broader relationship with NVIDIA across AI infrastructure and software. The companies are advancing solutions in GPU-accelerated data analytics, unstructured data processing, hybrid cloud infrastructure and consulting services. These capabilities are expected to help enterprises deploy AI workloads across cloud and on-premises environments with greater performance, flexibility and scalability.
IBM also introduced a new set of AI-powered experiences for the 2026 U.S. Open to make live tennis more personalized, informative and interactive for millions of fans worldwide. By turning complex court-level data into accessible insights, the company helped fans better understand the game through advanced technology. Such investments in innovation and collaborations will likely boost IBM’s commercial prospects and are likely to have generated incremental revenues for the Software segment.
In the to-be-reported quarter, IBM collaborated with LTM to strengthen enterprise software supply chain security through AI-driven vulnerability remediation. The partnership aims to help enterprises identify and address vulnerabilities in open-source software while minimizing disruptions to business-critical applications. Per the collaboration, LTM will leverage Lightwell’s AI-powered remediation capabilities to help enterprises implement validated software fixes at scale. Building on its long-standing relationship as an IBM Platinum Partner, LTM plans to offer services spanning dependency analysis, risk-based prioritization, DevSecOps integration, testing, validation and large-scale deployment support. The initiative combines Lightwell’s software remediation capabilities with LTM’s expertise in application modernization, cybersecurity and cloud technologies. The deal is expected to strengthen IBM's position in the enterprise software security market as organizations increasingly prioritize cybersecurity and software supply chain resilience.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7.62 billion, indicating an improvement from $7.21 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company is pegged at $16.84 billion. It generated revenues of $16.33 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.87 per share, indicating growth from $2.65 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the third 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:
Monolithic Power Systems, Inc. (MPWR - Free Report) is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.60% and carries a Zacks Rank #2.
The Earnings ESP for InterDigital, Inc. (IDCC - Free Report) is +1.27% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Oct. 29.
The Earnings ESP for Cadence Design Systems, Inc. (CDNS - Free Report) is +0.56% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct. 26.
View the Zacks #1 Rank List
Image: Bigstock
Can Healthy Increase in Software Revenues Benefit IBM's Q3 Earnings?
Key Takeaways
International Business Machines Corporation (IBM - Free Report) is scheduled to report third-quarter 2026 earnings after the closing bell on Oct. 21. In the 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, Automation and Data and Transaction Processing.
During the third quarter, IBM entered into a multi-year, $240 million agreement with Together AI to support the growing demand for enterprise artificial intelligence (AI) inference. The partnership will enable IBM to expand its cloud infrastructure offerings for open-source AI workloads and strengthen its position in the rapidly growing AI infrastructure market. Under the agreement, the company plans to deploy a large cluster of NVIDIA's HGX B300 systems on IBM Cloud and provide Together AI with enterprise-grade cloud infrastructure powered by NVIDIA’s advanced computing and Spectrum-X Ethernet networking technologies.
The deployment is designed to support high-performance AI inference and make large-scale workloads more cost-effective. The collaboration also expands IBM’s broader relationship with NVIDIA across AI infrastructure and software. The companies are advancing solutions in GPU-accelerated data analytics, unstructured data processing, hybrid cloud infrastructure and consulting services. These capabilities are expected to help enterprises deploy AI workloads across cloud and on-premises environments with greater performance, flexibility and scalability.
IBM also introduced a new set of AI-powered experiences for the 2026 U.S. Open to make live tennis more personalized, informative and interactive for millions of fans worldwide. By turning complex court-level data into accessible insights, the company helped fans better understand the game through advanced technology. Such investments in innovation and collaborations will likely boost IBM’s commercial prospects and are likely to have generated incremental revenues for the Software segment.
In the to-be-reported quarter, IBM collaborated with LTM to strengthen enterprise software supply chain security through AI-driven vulnerability remediation. The partnership aims to help enterprises identify and address vulnerabilities in open-source software while minimizing disruptions to business-critical applications. Per the collaboration, LTM will leverage Lightwell’s AI-powered remediation capabilities to help enterprises implement validated software fixes at scale. Building on its long-standing relationship as an IBM Platinum Partner, LTM plans to offer services spanning dependency analysis, risk-based prioritization, DevSecOps integration, testing, validation and large-scale deployment support. The initiative combines Lightwell’s software remediation capabilities with LTM’s expertise in application modernization, cybersecurity and cloud technologies. The deal is expected to strengthen IBM's position in the enterprise software security market as organizations increasingly prioritize cybersecurity and software supply chain resilience.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7.62 billion, indicating an improvement from $7.21 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company is pegged at $16.84 billion. It generated revenues of $16.33 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.87 per share, indicating growth from $2.65 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the third 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 -0.63% 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:
Monolithic Power Systems, Inc. (MPWR - Free Report) is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.60% and carries a Zacks Rank #2.
The Earnings ESP for InterDigital, Inc. (IDCC - Free Report) is +1.27% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Oct. 29.
The Earnings ESP for Cadence Design Systems, Inc. (CDNS - Free Report) is +0.56% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct. 26.