 "IBM Stock Inches Up Ahead Of Q4 Earnings Despite Cautious Analyst Outlook: Retail Remains Uncertain")
synopsis
Investors will be looking for updates on IBM’s AI growth, mainframe refresh, and the pending $7B HashiCorp acquisition during its fourth-quarter earnings call amid a divided retail outlook.
International Business Machines Corp. (IBM) stock edged up 0.6% in morning trading Wednesday ahead of its fourth-quarter earnings scheduled to be released after the closing bell, with retail sentiment divided on expectations.
Analysts forecast earnings per share (EPS) of $3.78 on revenue of $17.56 billion, according to Stocktwits data.
Morgan Stanley lowered its price target on IBM to $217 from $222 while maintaining an ‘Equal Weight’ rating ahead of the company’s earnings.
The bank views IBM as "largely fully valued" following a strong 2024, with expectations that Q4 earnings and its new three-year growth model—set to be unveiled at its Feb. 4 analyst day—will neither significantly beat nor miss Wall Street estimates.
The analyst suggests the event could be a "sell-the-news" moment for investors.
IBM executives are expected to provide updates on the company’s artificial intelligence (AI) initiatives.
In October, IBM reported its enterprise AI business was generating $1 billion in quarterly revenue, with a total generative AI book of business surpassing $3 billion. Analysts will look for signs of continued AI adoption and growth.
Another focus will be IBM’s upcoming z17 mainframe launch, which could drive a refresh cycle in its infrastructure business.
Morgan Stanley projects a 5% year-over-year growth rate for IBM’s infrastructure segment in 2025, with software revenue growth potentially reaching 8% due to enterprise license agreement (ELA) activity in the latter half of the year.
IBM’s pending $7 billion acquisition of Terraform creator and cloud provider HashiCorp is also expected to be discussed.
The deal, announced in April, has faced regulatory scrutiny, with the U.K.’s Competition and Markets Authority investigating the acquisition.
On Jan. 21, the Australian Competition and Consumer Commission (ACCC) requested public input on the deal, with provisional findings expected in March.
On Stocktwits, retail sentiment around IBM dipped to ‘neutral’ from ‘extremely bullish’ territory while chatter remained at ‘high’ levels, ahead of the company’s earnings.
One user expressed uncertainty about the stock’s short-term outlook and noted IBM shares appeared overvalued. At the same time, another investor highlighted IBM as a long-term favorite but pointed to near-term headwinds.
IBM shares have gained 21% over the last year and are up 3% year-to-date in 2025.
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