Here’s what Wall Street is saying about IBM ahead of earnings

IBM (IBM) is scheduled to report results of its fiscal second quarter after the market close on July 23, with a conference call scheduled for 5:00 pm ET. What to watch for:

GUIDANCE: Along with its last report, IBM guided for Q2 revenue of $16.4B-$16.75B. At the time, analysts were expecting the company to report Q2 revenue of $16.3B, but the consensus estimate has since risen to $16.59B. Meanwhile, Wall Street expects IBM to report Q2 earnings per share of $2.65.

AMERICA INVESTMENT: Less than a week after its Q1 report, IBM announced plans to invest $150B in America over the next five years to fuel the economy and to accelerate its role as the global leader in computing. This includes an investment of more than $30B in research and development to advance and continue IBM’s American manufacturing of mainframe and quantum computers.

PT HIKES: The Street has been fairly bullish on IBM since its last earnings report, and at least seven securities analysts have increased their price targets on the stock in the weeks leading up to the Q2 print. Most recently, Jefferies analyst Brent Thill raised the firm’s price target on IBM to $280 from $265 and maintained a Hold rating on the shares. The firm views the company’s Q2 estimates as achievable due to accelerating software growth and improving fundamentals. Jefferies remains remain bullish on IBM’s ability to sustain its software momentum but sees “mixed segment dynamics” for the company.

Last week, BMO Capital raised its price target on IBM to $300 from $260 and reiterated a Market Perform rating on the shares, saying the new Z17 can help drive growth over the next two fiscal years. Over the longer term, the firm continues to think mainframe will have limited growth, as the firm does not envision IBM winning meaningful AI workloads. Additionally, RBC Capital increased the firm’s price target on IBM to $315 from $285 and maintained an Outperform rating on the shares, saying Q2 will likely be a software driven quarter with a focus on potential Red Hat re-acceleration, GenAI bookings, and staying on pace with free cash flow seasonality. Traction around GenAI and Agentic orchestration and governance should remain in focus for the company’s positioning in enabling enterprise AI adoption, RBC added.

Stifel analyst David Grossman also raised the firm’s price target on IBM last week to $310 from $290, while keeping a Buy rating on the shares. While fundamentals are stable/positive, there may be difficult to predict upward earnings revisions in the current environment, which creates incremental risk into the earnings report and may suggest that a post-Q2 report is a more opportunistic entry point, the analyst tells investors in a research note. That same day, Morgan Stanley raised the firm’s price target on IBM to $253 from $233 and maintained an Equal Weight rating on the shares. The firm believes the market is already pricing in more than just free cash flow upside, and given the expectation for more mixed Software and Consulting results this quarter, Morgan Stanley believes the setup into Q2 earnings leans tactically cautious, the analyst tells investors in a research note.

Additionally, UBS two weeks ago Morgan Stanley raised the firm’s price target on IBM to $253 from $233 and affirmed an Equal Weight rating on the shares. The firm believes the market is already pricing in more than just free cash flow upside, and given the expectation for more mixed Software and Consulting results this quarter, Morgan Stanley believes the setup into Q2 earnings leans tactically cautious, the analyst tells investors in a research note.

QUANTUM: Last month, IBM unveiled its path to build what it says is the world’s first large-scale, fault-tolerant quantum computer, setting the stage for practical and scalable quantum computing. “Delivered by 2029, IBM Quantum Starling will be built in a new IBM Quantum Data Center in Poughkeepsie, New York and is expected to perform 20,000 times more operations than today’s quantum computers. To represent the computational state of an IBM Starling would require the memory of more than a quindecillion of the world’s most powerful supercomputers. With Starling, users will be able to fully explore the complexity of its quantum states, which are beyond the limited properties able to be accessed by current quantum computers.” “IBM is charting the next frontier in quantum computing,” said Arvind Krishna, Chairman and CEO, IBM. “Our expertise across mathematics, physics, and engineering is paving the way for a large-scale, fault-tolerant quantum computer – one that will solve real-world challenges and unlock immense possibilities for business.”

Just weeks after the announcement, IBM and Riken, a national research laboratory in Japan, unveiled the first IBM Quantum System Two ever to be deployed outside of the United States and beyond an IBM Quantum Data Center. The availability of this system also marks a milestone as the first quantum computer to be co-located with Riken’s supercomputer Fugaku. This effort is supported by the New Energy and Industrial Technology Development Organization, an organization under the jurisdiction of Japan’s Ministry of Economy, Trade and Industry’s “Development of Integrated Utilization Technology for Quantum and Supercomputers” as part of the “Project for Research and Development of Enhanced Infrastructures for Post 5G Information and Communications Systems.” IBM Quantum System Two at Riken is powered by IBM’s 156-qubit IBM Quantum Heron, the company’s best performing quantum processor to-date.