IBM’s Growth Outlook Strengthens as AI Boosts Consulting Business. IBM is making a strong comeback.
That’s the sentiment from Evercore ISI analyst Amit Daryanani, following International Business Machines Corp.’s (IBM) latest earnings report. The company’s optimistic outlook has Wall Street excited, sending IBM’s stock soaring—leading gainers in both the S&P 500 and Dow Jones Industrial Average. In fact, the stock is on track for its best single-day performance ever.
What’s driving this optimism? A brighter future for IBM’s consulting business.
“We believe the report underscored IBM’s unique position across both software and consulting, with AI and potential mergers & acquisitions serving as key catalysts for further growth,” Daryanani wrote.
IBM’s software revenue climbed 11.5% on a currency-neutral basis in the latest quarter, signaling strong momentum. While consulting revenue dipped 1%, the company expects significant improvement this year, supported by $5 billion in AI-related contracts poised for conversion into sales.
Shares of IBM surged 12.5% in afternoon trading, positioning the stock for its largest one-day gain since July 20, 2000, when it rose 13%.
Despite just 1% revenue growth last year, IBM now forecasts at least 5% growth in 2025, after currency adjustments. Ben Reitzes of Melius Research highlighted consulting as a key driver behind this optimistic outlook.
“Shifting this segment from a drag to a tailwind—along with an expected boost in infrastructure from the upcoming mainframe cycle—enabled IBM to confidently project 5%+ constant currency revenue growth for 2025,” Reitzes wrote. “For long-time IBM observers, this level of growth is quite rare.”
And it could get even better. Could next week’s analyst day provide a roadmap for even faster expansion?
“We see the potential for IBM to accelerate from 5%+ to 7% growth within a few years, as the business mix continues shifting toward Red Hat and other software segments, including HashiCorp and automation,” Reitzes added.
Morgan Stanley’s Erik Woodring noted that IBM’s stock momentum signals investor confidence in management’s 2025 outlook—perhaps even viewing it as conservative. He pointed to stronger-than-expected organic software growth and possible M&A activity as potential upside factors.
“The market may also be anticipating IBM’s next move on acquisitions (we agree), which could further boost 2025 estimates,” Woodring wrote. “At this point, it’s up to the bears to argue why this momentum won’t continue beyond next week’s analyst day.”
