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Will IBM's Focus on Quantum Computing Propel the Stock?
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International Business Machines Corporation (IBM - Free Report) recently unveiled Europe's first IBM Quantum Data Center in Ehningen, Germany, to expand its fleet of advanced, utility-scale quantum systems available to global users via the cloud. This is the first IBM quantum data center outside the United States and the second of its kind worldwide.
Featuring two utility-scale IBM Quantum Eagle-based systems and a soon-to-be-included IBM Quantum Heron-based system, the data center brings a new dimension to the realm of quantum computing by enabling users to increase the complexity of algorithms in the quantum hardware. As users seek to achieve quantum advantage — where quantum computers outperform the classical ones — the new quantum data center could pave the way for technological innovations across the quantum ecosystem.
Expansion of IBM’s New York Data Center
Last week, IBM completed the expansion of its Quantum Data Center in Poughkeepsie, NY, with the second deployment of the Quantum Heron processor. Accessible through the IBM cloud, this advanced system boasts a 16-fold performance improvement and a 25-fold increase in speed compared to its earlier counterparts. The integration has enabled the additional systems within the data center to operate at a utility scale, enabling them to perform quantum circuits with greater accuracy than classical computers.
As IBM continues to push the boundaries of quantum technology with its latest advancements, the Poughkeepsie data center remains central to its Quantum Development Roadmap. The company is planning to work with more than 250 organizations to accelerate the pace of discovery in quantum computing.
Evolution of IBM’s Qiskit Software
In May, IBM announced significant updates to Qiskit, its widely used quantum software platform. Launched in 2017, Qiskit has grown from a simple software development kit (SDK) to a comprehensive quantum software stack. This evolution is designed to maximize the performance of IBM's quantum hardware, allowing users to run increasingly complex quantum circuits.
The latest version includes a stable release of Qiskit SDK v1.x, which offers improved capabilities for building, optimizing and visualizing quantum circuits. Notably, the Qiskit Transpiler Service leverages artificial intelligence (AI) to optimize quantum circuits, making them 39 times faster and reducing memory usage threefold compared to previous versions. This AI-powered optimization, combined with heuristic techniques, significantly reduces circuit depth, enhancing overall performance.
IBM’s Qiskit stack now features a range of services tailored to various user needs. The Qiskit Runtime Service simplifies the execution of quantum circuits, while the Qiskit Code Assistant, powered by watsonx-based generative AI models, automates the development of quantum code. Additionally, the Qiskit Serverless tool facilitates quantum-centric supercomputing workloads across both quantum and classical hardware. These enhancements provide IBM Quantum Network members with the most advanced tools to discover new quantum algorithms.
IBM’s Watsonx Platform Gaining Traction
IBM’s Watsonx platform is likely to be the core technology platform for its AI capabilities. Watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive. This enterprise-ready AI and data platform comprises three products to help organizations accelerate and scale AI — the watsonx.ai studio for new foundation models, generative AI and machine learning, the watsonx.data fit-for-purpose data store built on an open lake house architecture and the watsonx.governance toolkit to help enable AI workflows to be built with responsibility and transparency.
Price Performance
Buoyed by strong demand for hybrid cloud and AI, IBM has surged 56.6% over the past year compared with the industry’s growth of 44.2%, outperforming peers like Amazon.com, Inc. (AMZN - Free Report) and Microsoft Corporation (MSFT - Free Report) .
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which are driving the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long haul. A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely boost profitability.
One-Year Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend of IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for IBM for 2024 have moved up 3.4% to $10.10 over the past year, while the same for 2025 has increased 1.3% to $10.51. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
IBM Profitability Dented by Margin Pressure
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 remain significant concerns.
Image Source: Zacks Investment Research
End Note
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 has led to a healthy demand trend.
Riding on a robust earnings surprise history, positive estimate revisions and favorable Zacks Rank, IBM appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.
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Will IBM's Focus on Quantum Computing Propel the Stock?
International Business Machines Corporation (IBM - Free Report) recently unveiled Europe's first IBM Quantum Data Center in Ehningen, Germany, to expand its fleet of advanced, utility-scale quantum systems available to global users via the cloud. This is the first IBM quantum data center outside the United States and the second of its kind worldwide.
Featuring two utility-scale IBM Quantum Eagle-based systems and a soon-to-be-included IBM Quantum Heron-based system, the data center brings a new dimension to the realm of quantum computing by enabling users to increase the complexity of algorithms in the quantum hardware. As users seek to achieve quantum advantage — where quantum computers outperform the classical ones — the new quantum data center could pave the way for technological innovations across the quantum ecosystem.
Expansion of IBM’s New York Data Center
Last week, IBM completed the expansion of its Quantum Data Center in Poughkeepsie, NY, with the second deployment of the Quantum Heron processor. Accessible through the IBM cloud, this advanced system boasts a 16-fold performance improvement and a 25-fold increase in speed compared to its earlier counterparts. The integration has enabled the additional systems within the data center to operate at a utility scale, enabling them to perform quantum circuits with greater accuracy than classical computers.
As IBM continues to push the boundaries of quantum technology with its latest advancements, the Poughkeepsie data center remains central to its Quantum Development Roadmap. The company is planning to work with more than 250 organizations to accelerate the pace of discovery in quantum computing.
Evolution of IBM’s Qiskit Software
In May, IBM announced significant updates to Qiskit, its widely used quantum software platform. Launched in 2017, Qiskit has grown from a simple software development kit (SDK) to a comprehensive quantum software stack. This evolution is designed to maximize the performance of IBM's quantum hardware, allowing users to run increasingly complex quantum circuits.
The latest version includes a stable release of Qiskit SDK v1.x, which offers improved capabilities for building, optimizing and visualizing quantum circuits. Notably, the Qiskit Transpiler Service leverages artificial intelligence (AI) to optimize quantum circuits, making them 39 times faster and reducing memory usage threefold compared to previous versions. This AI-powered optimization, combined with heuristic techniques, significantly reduces circuit depth, enhancing overall performance.
IBM’s Qiskit stack now features a range of services tailored to various user needs. The Qiskit Runtime Service simplifies the execution of quantum circuits, while the Qiskit Code Assistant, powered by watsonx-based generative AI models, automates the development of quantum code. Additionally, the Qiskit Serverless tool facilitates quantum-centric supercomputing workloads across both quantum and classical hardware. These enhancements provide IBM Quantum Network members with the most advanced tools to discover new quantum algorithms.
IBM’s Watsonx Platform Gaining Traction
IBM’s Watsonx platform is likely to be the core technology platform for its AI capabilities. Watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive. This enterprise-ready AI and data platform comprises three products to help organizations accelerate and scale AI — the watsonx.ai studio for new foundation models, generative AI and machine learning, the watsonx.data fit-for-purpose data store built on an open lake house architecture and the watsonx.governance toolkit to help enable AI workflows to be built with responsibility and transparency.
Price Performance
Buoyed by strong demand for hybrid cloud and AI, IBM has surged 56.6% over the past year compared with the industry’s growth of 44.2%, outperforming peers like Amazon.com, Inc. (AMZN - Free Report) and Microsoft Corporation (MSFT - Free Report) .
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which are driving the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long haul. A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely boost profitability.
One-Year Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend of IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for IBM for 2024 have moved up 3.4% to $10.10 over the past year, while the same for 2025 has increased 1.3% to $10.51. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
IBM Profitability Dented by Margin Pressure
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 remain significant concerns.
Image Source: Zacks Investment Research
End Note
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 has led to a healthy demand trend.
The stock delivered a trailing four-quarter average earnings surprise of 6.1%. It has a long-term growth expectation of 4.5%. IBM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Riding on a robust earnings surprise history, positive estimate revisions and favorable Zacks Rank, IBM appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.