International Business Machines (IBM) is set to report its fourth-quarter earnings on January 28 after the market closes. Wall Street predicts that IBM will generate about $19.19 billion in revenue and post earnings of roughly $4.29 per share, a 9.4% increase from the same quarter last year. Most of the growth is expected to come from IBM’s Software segment, which is its largest, as per the image below.
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Importantly, recent trends support this outlook. In the third quarter, IBM’s Software revenue grew by 10.6% year-over-year to $7.21 billion, driven by strong performance from Red Hat, which saw growth of 14%. The company is also investing heavily in its AI platform, watsonx, and in quantum computing. However, there are risks that investors should watch for. Indeed, IBM’s Consulting unit remains a laggard, as it grew by only 3% in the third quarter.
Interestingly, though, five-star Evercore analyst Amit Daryanani recently reiterated a Buy rating on IBM and raised his price target to $330 due to a favorable earnings setup. Daryanani believes that IBM can meet or slightly beat consensus estimates, thanks to cost-cutting efforts that are expected to deliver $4.5 billion in gross run-rate savings in 2025. Looking ahead, Evercore expects IBM’s 2026 growth to land at the lower end of its mid-single-digit target, supported by Red Hat, software improvements, and AI momentum, even as tougher comparisons weigh on its Infrastructure segment.
What Do Options Traders Anticipate?
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a 6% move in either direction.
Is IBM a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on IBM stock based on six Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $321.27 per share implies 9.4% upside potential. At the same time, TipRanks’ AI Analyst has an Outperform rating and a $354 per share price target.
