IBM Earnings Preview: AI, Cloud and What Traders Need to Know
By:Gus Downing
IBM (IBM), once the undisputed leader in AI and computing development, stayed ahead of competitors with events like DeepBlue’s defeat of Garry Kasparov in 1996 and Watson’s legendary run on Jeopardy in 2011
That changed over the last 10 years, and IBM seemingly became an afterthought when it comes to AI. But despite a lack of hype in the media, the company has been on a tear in 2025, and its earnings call tomorrow has the potential to send the stock to higher highs or to put a firm stop to the momentum.
Consensus estimates among analysts call for IBM to announce an earnings per share of $2.65 and revenue of $16.58 billion, increases of 9% and 5% year-over-year, respectively.
Of that $16.58 billion in anticipated revenue, $7.43 billion is expected to come from IBM’s software segment, $5.2 billion from consulting and $3.75 billion from infrastructure — aided by AI-enabled demand for the company’s new z17 mainframe computer.
Additional drivers include the status of IBM’s Power11 chips, which are expected to bolster AI infrastructure revenue, as well as continued strength from Red Hat and HashiCorp integrations.
Four catalysts could drive growth for IBM, and four risks that could hamper it.
Catalysts:
Risks:
How IBM has reacted to past earnings and what that means now
As stated earlier, IBM has been on an absolute tear this year. The stock is currently trading up 29% year-to-date (YTD), dramatically outperforming the market and even outperforming peers like Nvidia, Meta and Microsoft (MSFT). This comes despite a slowdown in July when IBM has pulled back about 5%, testing the 50-day moving average.
Over the past five years, IBM has moved positively after earnings calls 63% of the time, with a median move of 4.8% to the upside. Downside moves have come the other 37% of the time, with a median move of 6.6% to the downside. In all cases, forward guidance has been a bigger driver than actual earnings performance.
IBM has been quietly making major headway in AI for years, and if that continues into the earnings call tomorrow, there is no reason it couldn’t make higher highs. However, should that trend slow down or if any clear indications are given that the competition is catching up, it could be detrimental to share price and set IBM back relative to competitors.
Gus Downingis host of the tastylive Network show Risk and Reward. @GainsByGus
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