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Is IBM Stock a Portfolio Must-Have Post Solid Q4 Earnings?
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International Business Machines Corporation (IBM - Free Report) reported solid fourth-quarter 2024 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company witnessed healthy demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. At the end of 2024, IBM exceeded the three-year mid-term model metrics related to revenue, profitability and cash flow growth that it laid out at the end of 2021.
IBM Rides on Cloud, AI Demand
IBM’s growth is expected to be driven primarily by analytics, cloud computing and security in the long haul. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, 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 firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This, in turn, has translated into a healthy demand for IBM hybrid cloud solutions.
The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM RedHat’s portfolio, bringing additional functionalities for cloud infrastructure management. The integration of HashiCorp’s cloud software capabilities has bolstered IBM’s hybrid multi-cloud approach. The acquisitions of StreamSets and webMethods have improved IBM’s AI platform and automation capabilities, bringing together key competencies in integration, API management and data ingestion. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts have enabled IBM to develop comprehensive application and data integration platforms in the industry.
Healthy Margins Bouy IBM
Despite economic uncertainty due to geopolitical issues, supply chain vulnerabilities, incessant cyber threats and the evolving landscape of interest rates and inflation levels, IBM's margins have improved over the past few quarters. Gross profit in the fourth quarter of 2024 improved to $10.44 billion from $10.23 billion in the prior-year quarter, resulting in respective gross margins of 59.5% and 59.1% owing to a strong portfolio mix. A combination of a better business mix, improving operating leverage through productivity gains, and increased investment in growth opportunities will likely boost profitability and help IBM deliver sustainable growth with advanced technology and deep consulting expertise.
Image Source: Zacks Investment Research
IBM to Focus More on Watsonx Platform
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.
Estimate Revision Trend of IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for 2025 have jumped 2.1% to $10.78 over the past 7 days, while the same for 2026 has increased 2.4% to $11.40. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
Price Performance
Buoyed by robust quarterly results, IBM has surged 44.2% over the past year compared with the industry’s growth of 3.1%, outperforming peers like Microsoft Corporation (MSFT - Free Report) and Amazon.com, Inc. (AMZN - Free Report) .
One-Year IBM Stock Price Performance
Image Source: Zacks Investment Research
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, IBM appears to be a solid investment proposition. Further, a strong emphasis on hybrid cloud, diligent execution of operational plans and AI focus are driving more value for customers. For 2025, the company expects revenues to grow at least 5% on a constant currency basis driven by a strong portfolio mix, operating leverage and yield from productivity initiatives.
Riding on a robust earnings surprise history and favorable Zacks Rank, it appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock.
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Is IBM Stock a Portfolio Must-Have Post Solid Q4 Earnings?
International Business Machines Corporation (IBM - Free Report) reported solid fourth-quarter 2024 results, with adjusted earnings and revenues beating the respective Zacks Consensus Estimate.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company witnessed healthy demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. At the end of 2024, IBM exceeded the three-year mid-term model metrics related to revenue, profitability and cash flow growth that it laid out at the end of 2021.
IBM Rides on Cloud, AI Demand
IBM’s growth is expected to be driven primarily by analytics, cloud computing and security in the long haul. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, 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 firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This, in turn, has translated into a healthy demand for IBM hybrid cloud solutions.
The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM RedHat’s portfolio, bringing additional functionalities for cloud infrastructure management. The integration of HashiCorp’s cloud software capabilities has bolstered IBM’s hybrid multi-cloud approach. The acquisitions of StreamSets and webMethods have improved IBM’s AI platform and automation capabilities, bringing together key competencies in integration, API management and data ingestion. Complementing IBM DataStage and Databand platform with a hybrid and multi-cloud approach, the buyouts have enabled IBM to develop comprehensive application and data integration platforms in the industry.
Healthy Margins Bouy IBM
Despite economic uncertainty due to geopolitical issues, supply chain vulnerabilities, incessant cyber threats and the evolving landscape of interest rates and inflation levels, IBM's margins have improved over the past few quarters. Gross profit in the fourth quarter of 2024 improved to $10.44 billion from $10.23 billion in the prior-year quarter, resulting in respective gross margins of 59.5% and 59.1% owing to a strong portfolio mix. A combination of a better business mix, improving operating leverage through productivity gains, and increased investment in growth opportunities will likely boost profitability and help IBM deliver sustainable growth with advanced technology and deep consulting expertise.
Image Source: Zacks Investment Research
IBM to Focus More on Watsonx Platform
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.
Estimate Revision Trend of IBM
IBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for 2025 have jumped 2.1% to $10.78 over the past 7 days, while the same for 2026 has increased 2.4% to $11.40. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
Price Performance
Buoyed by robust quarterly results, IBM has surged 44.2% over the past year compared with the industry’s growth of 3.1%, outperforming peers like Microsoft Corporation (MSFT - Free Report) and Amazon.com, Inc. (AMZN - Free Report) .
One-Year IBM Stock Price Performance
Image Source: Zacks Investment Research
End Note
With solid fundamentals and healthy revenue-generating potential driven by robust demand trends, IBM appears to be a solid investment proposition. Further, a strong emphasis on hybrid cloud, diligent execution of operational plans and AI focus are driving more value for customers. For 2025, the company expects revenues to grow at least 5% on a constant currency basis driven by a strong portfolio mix, operating leverage and yield from productivity initiatives.
The stock delivered a trailing four-quarter average earnings surprise of 6.1% on average. 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 and favorable Zacks Rank, it appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock.