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

IBM (IBM) is scheduled to report results of its fiscal third quarter after the market close on October 22, with a conference call scheduled for 5:00 pm ET. What to watch for:

GUIDANCE: Along with its last report, IBM reiterated its FY25 constant currency revenue growth view of at least 5%. The company added on its quarterly call that it expects $4.5B in productivity gains in FY25. Looking to Q3, Wall Street expects IBM to report Q3 earnings per share of $2.45 on revenue of $16.1B.

ANTHROPIC: Earlier this month, IBM and Anthropic announced a strategic partnership to accelerate the development of enterprise-ready AI by infusing Anthropic’s Claude, a large-language model, into IBM’s software portfolio to deliver measurable productivity gains, while building security, governance, and cost controls directly into the lifecycle of software development. “Through the partnership, Claude will be integrated into select IBM software products, starting with IBM’s new AI-first integrated development environment, designed with advanced task generation capabilities for enterprise software development lifecycles, including software modernization,” the companies said. “The IDE is available in private preview to select IBM clients and in early testing, more than 6,000 early adopters within IBM are using the new IDE, reporting productivity gains averaging 45 percent, translating to meaningful cost savings while maintaining code quality and security standards. As organizations move from AI experimentation to production deployment, they need solutions that integrate seamlessly with existing enterprise infrastructure and meet strict IT requirements. IBM brings proven capabilities in enterprise software delivery, hybrid cloud architecture, and regulated industry expertise to ensure AI tools work within the complex realities of global business operations.”

JEFFERIES UPS TARGET: This week, Jefferies raised the firm’s price target on IBM to $300 from $280 and maintained a Hold rating on the shares ahead of the Q3 report. The firm believes expectations are higher into IBM’s earnings after management highlighted a stronger macro backdrop and potential for software growth reacceleration in the second half of the year. Jefferies sees the growth driven by continued Red Hat strength and incremental tailwinds from automation. It thinks IBM shares can “grind higher” on improved software execution but continues to prefer others for broader artificial intelligence exposure.

MORGAN STANLEY: Last week, Morgan Stanley increased the firm’s price target on IBM to $256 from $253 and reiterated an Equal Weight rating on the shares. The firm’s tracker points to accelerating organic Software growth in Q3 that should be “enough to meet or slightly exceed” Street expectations, but it “wouldn’t be chasing results here” as shares trade at a premium to peers, the analyst tells investors in a preview.

Several weeks earlier, the firm said in a note to investors that IBM is the “clear leader” in the quantum market after HSBC (HSBC) announced it successfully used IBM’s Heron quantum processor to better optimize bond trading, one of the first known commercial applications of quantum. Morgan Stanley’s research indicates that IBM has the largest and broadest ecosystem of advanced quantum computers today, the analyst tells investors in a research note. The firm finds early quantum commercial applications as “incredibly important” in proving the quantum value proposition. However, Morgan Stanley finds it challenging to gain confidence that quantum should be a material driver of IBM shares.