- IBM projects more than 5% annual revenue growth long-term, led by its software business, exceeding analyst expectations of about 4% for 2026-2027.
- The company’s strategic shift to software and services is supported by acquisitions like HashiCorp and Apptio (HCP), with software expected to grow 10% annually and infrastructure at 1%-3%.
- Despite consulting challenges, IBM anticipates this segment to grow ahead of the market due to the GenAI shift, though analysts view the overall sales outlook as cautious.
International Business Machines Corp. (IBM) has projected a robust revenue growth trajectory, surpassing analyst expectations, primarily driven by its expanding software business. During a presentation, IBM’s Chief Financial Officer, Jim Kavanaugh, announced that the company anticipates long-term sales to grow more than 5% annually, without specifying the exact timeframe, but analysts had previously forecasted around 4% growth for the fiscal years 2026 and 2027 in constant currency.
IBM’s strategic pivot from traditional hardware to a focus on software and services has been facilitated through significant acquisitions, such as the proposed acquisition of HashiCorp Inc. (HCP) and the completed purchase of Apptio for $4.6 billion. These moves are part of IBM’s broader transformation strategy to bolster its product offerings and market position.
The market reacted positively to IBM’s outlook, pushing shares up $3.73 or 1.43% to close at $264.46. The stock hit a 52-week high of $265.25, building on a 13% surge from January 30, driven by strong Q4 results and a 2025 revenue forecast projecting at least 5% growth in constant currency. Kavanaugh highlighted that the software segment is expected to see an annual growth of about 10%, exceeding previous analyst projections of 7%-9% through 2027. Conversely, the infrastructure segment is projected to grow at a more modest pace of 1%-3%, with future revenue expected from innovations like quantum computing.
Despite the upbeat software outlook, IBM’s consulting division, which has seen challenges recently, is anticipated to grow faster than the market, adapting to the shift towards Generative AI (GenAI) technologies. However, Anurag Rana from Bloomberg Intelligence noted that IBM’s sales outlook, while strong, might be seen as cautious given the software segment’s strength, suggesting that consulting might not recover quickly. This mixed performance across different units underscores IBM’s ongoing transformation and the nuanced challenges it faces in navigating market transitions while capitalizing on technological advancements.
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