Core Viewpoint - IBM is positioned as a significant player in the AI sector, with analysts optimistic about its upcoming quarterly results and long-term growth potential [1][2]. Group 1: Quarterly Results Expectations - Evercore ISI anticipates IBM will report Q4 results that are in line with or slightly better than expectations, driven by strengths in Infrastructure and improvements in Consulting [2]. - The firm expects IBM's cost-saving initiatives to yield $4.5 billion in gross run-rate savings by 2025, which will support margin expansion and EPS upside in Q4 [2]. Group 2: Future Guidance and Key Focus Areas - IBM is expected to provide formal guidance for CY26, with initial growth forecasts at the lower end of the mid-single-digit target range and approximately $15 billion in free cash flow [3]. - Investors will be looking for updates on AI bookings, the CFLT acquisition, quantum computing advancements, and the growth trajectory of Software and Consulting [3][4]. Group 3: Specific Updates of Interest - Key updates sought by investors include: 1) AI bookings and revenue disclosures, along with expectations for their contribution to growth in 2026 [4] 2) Details on the CFLT acquisition, including strategy, integration with IBM's software portfolio, and revenue/cost synergy opportunities [4] 3) Progress in Quantum Computing, aiming for quantum advantage by 2026 and an error-corrected computer by 2028 [4] 4) Software growth trajectory for 2026 and Consulting signings that could drive inflection in 2026 [4] 5) Updates on ongoing cost-saving initiatives [4].

Core Viewpoint - IBM's stock has experienced a decline of about 3% in the last week as investors await the Q4 2025 results, indicating a cautious market sentiment [1] Company Overview - IBM is a global provider of hybrid cloud, software, and services, with a market capitalization of approximately $272 billion [4] - The company has shifted its focus from commoditized IT services to more valuable software and AI-based enterprise workloads [4] Stock Performance - Currently, IBM's stock is trading around $295, down from a peak of over $320 earlier in the quarter, reflecting a market re-evaluation of the stock's pricing [2] - Over the past 52 weeks, IBM's stock has ranged from approximately $214 to just under $325, and despite recent corrections, it remains significantly higher than a year ago [5] Valuation Metrics - IBM is trading at a trailing P/E multiple of approximately 27x and a forward P/E multiple of about 25x, along with a price-to-sales (P/S) multiple of approximately 4.2x, indicating a premium valuation compared to its historical averages [6] - The current valuation is driven by enthusiasm surrounding IBM's AI integration and mainframe solutions, raising questions about the sustainability of these multiples going into the earnings release [6] Market Context - The upcoming earnings report is seen as a potential sentiment reset rather than just a review of performance, as investors are becoming more selective during the earnings season [3] - The focus for IBM's report will be on the sustainability of software growth, free cash flow guidance, and the longevity of the Z17 cycle into 2026 [3]

Core Viewpoint - The article discusses the underperformance of International Business Machines Corporation (IBM) shares and highlights the need for investors to be aware of this trend [1]. Group 1: Analyst Background - The analyst, Uttam, specializes in growth-oriented investment analysis, focusing on sectors such as semiconductors, artificial intelligence, and cloud software [1]. - Uttam has experience working in Silicon Valley with major technology firms like Apple and Google, leading teams [1]. - He co-authors The Pragmatic Optimist Newsletter, which is recognized by leading publications like the Wall Street Journal and Forbes [1]. Group 2: Investment Position - The analyst has a beneficial long position in IBM shares through stock ownership, options, or other derivatives [2].

Core Viewpoint - The article discusses the underperformance of International Business Machines Corporation (IBM) shares and suggests a cautious approach for investors aware of this trend [1]. Group 1: Analyst Background - The analyst, Uttam, specializes in growth-oriented investment analysis, focusing on sectors such as semiconductors, artificial intelligence, and cloud software [1]. - Uttam has experience working in Silicon Valley with major technology firms like Apple and Google, leading teams [1]. - He co-authors The Pragmatic Optimist Newsletter, which is frequently cited by prominent publications like the Wall Street Journal and Forbes [1]. Group 2: Investment Position - The analyst has a beneficial long position in IBM shares through stock ownership, options, or other derivatives [2].

Group 1 - AI's return on investment remains uncertain for business executives, with only 24% able to identify revenue sources from AI, despite expectations for significant contributions by 2030 [3][8] - Global AI spending is projected to reach $2.52 trillion by 2026, reflecting a 44% year-over-year increase, with 47% of AI investments currently aimed at productivity and efficiency [5] - The financial services sector is heavily investing in AI, with major banks like Bank of America and Goldman Sachs anticipating future efficiency gains, despite acknowledging potential initial challenges [6] Group 2 - Executives expect AI to enhance productivity by 42% over the next four years, with two-thirds anticipating most gains by 2030 [7] - Nearly 80% of executives believe that 2030 will mark a significant increase in AI's contribution to enterprise revenue, compared to 40% who report current revenue boosts from AI [8] - AI investment as a percentage of revenue is expected to more than double in the next four years, although 68% of executives express concerns about integration issues potentially hindering AI efforts [8]

Core Viewpoint - IBM is set to report its fourth-quarter 2025 earnings on January 28, 2026, with consensus estimates for sales at $19.21 billion and earnings per share (EPS) at $4.33 [1][7]. Earnings Estimates - Earnings estimates for 2025 remain stable at $11.38, while estimates for 2026 have increased by 0.3% to $12.19 per share over the past 60 days [1][2]. - The current EPS estimate for Q1 is $4.33, and for Q2 is $1.77, with no change in the full-year estimates for 2025 and a slight increase for 2026 [2]. Earnings Surprise History - IBM has achieved an average earnings surprise of 8.1% over the last four quarters, consistently beating estimates, with the last quarter showing a surprise of 8.6% [3][4]. Factors Influencing Upcoming Results - New AI-driven partnerships with S&P Global Inc. and Microsoft Corporation are expected to enhance revenue in the Software and Consulting segments [7][8][9]. - IBM's partnership with S&P Global aims to integrate AI tools into supply chain management, potentially generating incremental revenue [8]. - The extended partnership with Microsoft will enhance IBM's consulting capabilities, likely leading to additional revenue [9]. Competitive Landscape - Despite growth in cloud and AI, IBM faces significant competition from Amazon Web Services and Microsoft Azure, along with challenges in transitioning its business model to the cloud [11]. - The company is experiencing pricing pressure that is eroding margins, and profitability has been declining over the years [11]. Price Performance - Over the past year, IBM's stock has increased by 30.5%, while the industry has risen by 93.5%, outperforming peers like Microsoft and Oracle [12]. Valuation Metrics - IBM is currently trading at a forward price/earnings ratio of 23.8, which is higher than the industry average of 17.96 and its own historical mean of 14.78 [14]. Investment Considerations - IBM aims to capitalize on the growing demand for hybrid cloud and generative AI solutions, which are expected to drive growth in its Software and Consulting segments [15][18]. - However, frequent acquisitions have raised integration risks and negatively impacted the balance sheet, leading to high levels of goodwill and intangible assets [16]. Long-term Growth Outlook - The company anticipates that analytics, cloud computing, and security services will be key drivers of growth, supported by improved operating leverage and investments in growth opportunities [18].

Market Overview - U.S. stock markets faced a significant downturn, with the S&P 500 and Nasdaq experiencing their largest drop in over three months, primarily due to heightened risk-off sentiment linked to President Trump's tariff threats regarding Greenland [1] - The market capitalization of major stocks, including Nvidia and Apple, decreased by approximately $700 billion [1] Stock Performance - The Nasdaq fell by 2.39% to 22,954.32, the S&P 500 dropped 2.06% to 6,796.86, and the Dow Jones Industrial Average lost 1.76% to 48,488.59 [2] - Netflix Inc. saw its shares decline by 1.08% to close at $87.05, with an after-hours drop of 4.84% to $82.84 [2] - IBM's stock decreased by 4.68% to $291.35, with analysts predicting an 8% rally in the near future despite the decline [5] - United Airlines shares dropped by 4.34% to $108.57 but gained 3.46% in after-hours trading to $112.33 [6] - Block Inc.'s stock fell by 5.03% to $62.63, with a 52-week range of $94.25 to $44.27 [8] - Strategy Inc. shares plunged by 7.76% to $160.23, with a significant drop from its historical highs [11] Company Developments - Netflix announced a switch to an all-cash offer for acquiring Warner Bros. Discovery's studio and streaming businesses, maintaining a total price of $82.7 billion [3] - The acquisition includes major franchises such as "Game of Thrones," "Harry Potter," and DC superheroes, enhancing Netflix's content library [4] - United Airlines reported record fourth-quarter revenue of $15.4 billion and a diluted EPS of $3.19, despite a $250 million pre-tax hit from the government shutdown [7] - Block Inc. highlighted its alternative lending ecosystem, providing over $200 billion in credit, with stable loss rates since 2013 [9] - Strategy Inc. increased its Bitcoin holdings to 709,715 BTC, acquired for $53.92 billion, making it one of the largest corporate holders globally [12]

Core Viewpoint - Increased market volatility may present an opportunity to acquire steady dividend stocks at lower prices, potentially offering higher yields [1] Group 1 - The current market conditions are characterized by increased volatility [1] - Investors may benefit from purchasing dividend stocks during this period [1] - The potential for higher yields is highlighted as a key advantage of this strategy [1]

Core Insights - IBM has partnered with e& to develop an enterprise-grade agentic AI foundation focusing on policy, risk, and compliance, enhancing its position as a trusted AI partner globally [1][8] Group 1: IBM's AI Solutions - IBM's agentic AI solution is powered by watsonx Orchestrate, featuring over 500 tools and customizable AI agents to assist employees and auditors in navigating legal and compliance information [2][8] - The watsonx Orchestrate platform enables AI agents to reason, manage tasks, and integrate with enterprise systems while adhering to governance rules, streamlining compliance workflows and providing 24/7 self-service access [3][8] - IBM is collaborating with Datavault AI to deliver enterprise-grade AI at the edge using the SanQtum AI platform, further solidifying its leadership in enterprise AI [4] Group 2: Competitive Landscape - IBM faces competition from Oracle, which has launched an AI Data Platform and Agent marketplace to enhance AI adoption, and has partnered with NVIDIA to integrate AI tools into Oracle Cloud [5] - Microsoft is investing significantly in expanding AI data centers and cloud capacity, partnering with various companies to accelerate enterprise AI growth [6] Group 3: Financial Performance and Valuation - IBM shares have increased by 36.3% over the past year, while the industry has seen a growth of 94.3% [7] - IBM's forward price-to-sales ratio stands at 4.05, which is below the industry average [9] - Earnings estimates for 2025 remain stable at $11.38, while estimates for 2026 have increased by 0.3% to $12.19 [10]

Market Overview - The Dow Jones Industrial Average declined by 559.24 points (-1.13%) on January 20th, 2026, due to escalating geopolitical tensions and the threat of new tariffs from President Trump on eight NATO allies [1] - Investor confidence was shaken, leading to a sell-off in equities and a shift towards safe-haven assets like gold and silver [1] Company Performance - Technology and industrial stocks were significantly affected, with 3M Company (MMM) experiencing the largest drop at -6.50%, influenced by post-earnings movements [2] - IBM (IBM) also faced a notable decline of -4.47%, while Nvidia (NVDA) and Amazon (AMZN) fell by -2.57% and -1.77% respectively, indicating a broader sell-off among major tech firms [2] Resilient Stocks - Despite the overall market downturn, some Dow components showed gains, with UnitedHealth Group (UNH) rising by +1.05% [3] - Travelers Companies (TRV) increased by +0.71%, and Procter & Gamble (PG) gained +0.70%, demonstrating resilience in a challenging market [3] - Boeing (BA) and Nike (NKE) also recorded modest increases of +0.14% each, highlighting pockets of strength amidst the decline [3]