International Business Machines Corporation IBM is scheduled to report third-quarter 2026 earnings after the closing bell on Oct. 21. In the quarter, the company is likely to have recorded marginally higher revenues from the Consulting segment driven by rising demand for technology consulting and business transformation services.
Factors at Play
The Consulting segment comprises Strategy and Technology (previously reported as Business Transformation and Technology Consulting) and Intelligent Operations (previously reported as Application Operations). It provides consulting and application management services that offer value and innovation to clients by leveraging industry, technology and business strategy and process know-how.
During the to-be-reported quarter, IBM partnered with India-based artificial intelligence (AI) company Sarvam to develop and test sovereign AI technologies for government agencies and regulated industries in the subcontinent. The collaboration aims to build AI systems that give organizations greater control over data, governance and operations while supporting digital transformation across the public sector. IBM also collaborated with Arm Holdings plc to give enterprises more software choices for mission-critical workloads. IBM’s latest processor will enable Arm-native Linux environments to run alongside z/OS and Linux on IBM Z, giving enterprises access to a broader software ecosystem while maintaining security, reliability and scalability. These are likely to have generated additional revenues for the Consulting segment.
In the third quarter, IBM acquired Logiq Consulting, a U.K.-based cybersecurity consultancy, to strengthen its secure digital transformation capabilities and expand its presence across highly regulated industries. The acquisition reinforces IBM's strategy of expanding its cybersecurity portfolio while capitalizing on the growing demand for secure hybrid cloud and AI solutions.
Logiq Consulting brings specialized Secure by Design capabilities, allowing organizations to integrate cybersecurity throughout the technology lifecycle rather than addressing vulnerabilities after deployment. These capabilities complement IBM's existing cybersecurity transformation services and SiXworks' digital transformation expertise in defense and public sector markets. In addition, Logiq's DISX managed sovereign collaboration platform enables government suppliers to exchange sensitive information securely with U.K. government and defense organizations while maintaining control over data management. Integrating these capabilities with IBM's hybrid cloud, AI and consulting expertise could create opportunities for cross-selling services and expanding relationships with security-conscious customers. The buyout also boosts IBM's digital sovereignty offerings as governments and regulated enterprises increasingly prioritize data control, regulatory compliance and operational resilience.
Overall Expectations
The Zacks Consensus Estimate for Consulting revenues is pegged at $5.35 billion, indicating an improvement from $5.32 billion in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company is pegged at $16.84 billion. It generated revenues of $16.33 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $2.87 per share, indicating growth from $2.65 in the year-earlier quarter.
Earnings Whispers
Our proven model does not predict an earnings beat for IBM for the third quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
IBM currently has an ESP of -0.63% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
International Business Machines Corporation Price and EPS Surprise
International Business Machines Corporation price-eps-surprise | International Business Machines Corporation Quote
Stocks to Consider
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Monolithic Power Systems, Inc. MPWR is set to release quarterly numbers on Oct. 29. It has an Earnings ESP of +1.60% and carries a Zacks Rank #2.
The Earnings ESP for InterDigital, Inc. IDCC is +1.27% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Oct. 29.
The Earnings ESP for Cadence Design Systems, Inc. CDNS is +0.56% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct. 26.
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This article originally published on Zacks Investment Research (zacks.com).