International Business Machines Corp. (IBM) has projected a stronger revenue growth trajectory for the upcoming years, largely driven by its expanding software segment.
IBM’s Chief Financial Officer, Jim Kavanaugh, announced on Tuesday that the company’s long-term sales are expected to increase by over 5% annually. Although he did not specify the exact number of years covered by this forecast, analysts had anticipated approximately 4% growth in constant currency for fiscal years 2026 and 2027. Kavanaugh’s insights suggest a more optimistic view, especially as IBM continues to pivot from its traditional computing roots to focus on software and services.
Part of IBM’s strategy involves strategic acquisitions to broaden its offerings. Notably, the company announced a proposed acquisition of Hashicorp Inc. in April and previously purchased Apptio for $4.6 billion in 2023. These moves are indicative of IBM’s shift towards a more software-centric business model, a transition that appears to be yielding positive results.
IBM’s shares responded positively to this outlook, climbing 1.4% to $264.46 at Tuesday’s market close in New York. The stock has been performing well, with a significant 13% increase on January 30. This surge was primarily fueled by the company’s robust fourth-quarter results and a promising revenue forecast for 2025, predicting at least 5% growth in constant currency.
The software segment is expected to achieve around 10% annual growth, surpassing analysts’ expectations of between 7% and 9% through 2027. Meanwhile, the infrastructure unit is projected to grow by 1% to 3%. Kavanaugh also highlighted potential future revenue from quantum computing in this unit, hinting at IBM’s innovative future ventures.
Consulting, another division within IBM, aims to outperform the market despite recent struggles. Kavanaugh commented on the sector’s ongoing transition, driven by technological shifts such as Generative Artificial Intelligence (GenAI). Anurag Rana, a Bloomberg Intelligence analyst, remarked that IBM’s sales outlook appears “cautious” given its strong software capabilities. However, the consulting segment might not see immediate rebound benefits.
IBM’s optimistic forecast for its future revenue demonstrates confidence in its ongoing transformation and growth strategies. The company’s emphasis on expanding its software and advisory services signals a strategic shift that has been positively received by investors. While Kavanaugh’s projections appear conservative in some areas, particularly consulting, the overall outlook suggests a solid path forward for IBM.
