IBM (NYSE: IBM) is scheduled to report quarterly earnings on July 22 after the closing bell, and investors will be looking to see whether the tech giant can continue building on its recent momentum.
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The company has spent the last several years shifting its business toward higher-margin software and away from some of its older hardware businesses. That strategy has helped improve profits, generate strong cash flow, and position IBM to benefit from growing demand for artificial intelligence and cloud computing.
This earnings report will give investors a better idea of how those efforts are paying off.
Wall Street Is Growing More Bullish on IBM
According to Bank of America, IBM stock is too attractive to ignore ahead of earnings.
Analyst Wamsi Mohan recently raised his price target to $330 per share from $315 before the company’s earnings report later this month. Mohan expects the company’s software business to get an additional boost from its acquisition of Confluent.
“Upside [will be] driven by faster Confluent synergies and stronger growth in software and power & storage infrastructure,” he added, as quoted by CNBC, with a buy rating. “[Reiterate] Buy as IBM is mixing up to higher margin software (incl. M&A), driving strong FCF, & optionality from quantum.”
The analyst believes IBM’s growing software business, strong free cash flow, and long-term opportunities in quantum computing could continue supporting the stock.
Software Growth Remains the Top Priority
The company has been focusing on software because it generally produces higher profit margins and more recurring revenue than hardware. It has also expanded its software portfolio through acquisitions, helping strengthen its position in cloud computing, automation, and data management.
Investors will also be watching IBM’s infrastructure business, including its Power servers and storage products. Strong demand in that segment could help boost the company’s overall results. Artificial intelligence is expected to be another major topic during the earnings call.
IBM has been investing heavily in enterprise AI through its watsonx platform, which is designed to help businesses build and manage AI applications. Investors will be looking for updates on customer demand and whether AI is helping drive software sales.
Cash Flow and Quantum Offer Long-Term Upside
IBM has consistently generated strong cash flow, giving the company flexibility to invest in new technologies, make acquisitions, pay its dividend, and strengthen its balance sheet.
Another long-term opportunity is quantum computing. While the technology is still in its early stages, the company is considered one of the leaders in the field. Any updates on its quantum business could attract attention from investors looking beyond the company’s near-term results.
What to Look For With Earnings
This earnings report will be important in showing whether IBM can continue delivering steady growth. Investors will be looking for strong software revenue, healthy profit margins, solid cash flow, and positive guidance for the rest of the year. Management’s outlook may be just as important as the quarterly numbers themselves.
Strong results and an upbeat forecast could reinforce Wall Street’s confidence that the company’s shift toward software, AI, and higher-margin businesses is continuing to pay off.
With analysts becoming more bullish and investors looking for signs of continued growth, IBM’s upcoming earnings report could be one of the company’s most closely watched updates this year.
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