International Business Machines Corporation IBM is scheduled to report first-quarter 2026 earnings on April 22. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Software segment with a strong focus on product innovation and the growing clout of watsonx.ai across various sectors.
Factors at Play
The Software segment includes Hybrid Cloud (previously reported as Red Hat), Automation and Data and Transaction Processing.
During the first quarter, IBM inked a partnership with ElevenLabs, an AI research and product company, to integrate advanced voice AI (speech-to-text and text-to-speech) into IBM watsonx Orchestrate. The collaboration is expected to boost IBM’s commercial prospects in several industries such as banks, insurance companies, healthcare providers and utilities. The company partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions while strengthening its role as a trusted AI partner for businesses worldwide. These are likely to have generated incremental revenues for the Software segment.
In the quarter under review, IBM extended its collaboration with the organizers of the Masters Tournament to introduce new AI-powered features across the Masters digital platforms, enhancing the fan experience. The company introduced Master's Vault Search, a feature powered by its watsonx platform. It uses AI agents built on Granite small language models and controlled through watsonx Orchestrate to help fans explore more than 50 years of tournament history using simple questions.
IBM partnered with global technology group e& to build an enterprise-grade agentic AI foundation, starting with policy, risk and compliance. The collaboration expanded IBM’s enterprise-grade agentic AI solutions (powered by its watsonx Orchestrate), while strengthening its role as a trusted AI partner for businesses worldwide. The platform offers more than 500 tools and customizable AI agents that help employees and auditors quickly find, understand and act on legal, regulatory and compliance information. These are likely to have generated incremental revenues for the Software segment.
In the first quarter, IBM unveiled Sovereign Core, an AI-ready software designed to help enterprises, governments and service providers build and manage secure, self-controlled technology environments with sovereignty at its core. Built on Red Hat’s open-source foundation, IBM’s Sovereign Core provides organizations with built-in control over their platforms and AI systems, using always-on security, local control planes and continuous observance without relying on contracts or external providers. It also supports secure, scalable AI operations by enabling organizations to run and govern AI models locally while efficiently managing identity, access and compliance across large environments.
During the quarter, IBM completed the buyout of Confluent, Inc., a leading provider of an open-source enterprise data streaming platform. The deal has brought real-time data across IBM’s platforms, creating a unified data foundation that allows AI models, agents and automated workflows to operate with up-to-date context across on-premises, cloud and hybrid environments. The buyout has enabled IBM to build a scalable ecosystem to support next-generation digital operations. It also positions IBM to lead AI-driven enterprises by enabling smarter, faster and more robust business processes with real-time data.
Overall Expectations
The Zacks Consensus Estimate for Software revenues is pegged at $7.04 billion, indicating an improvement from $6.34 billion recorded in the year-ago quarter.
The Zacks Consensus Estimate for total revenues for the company stands at $15.65 billion. It generated revenues of $14.54 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $1.81 per share, indicating growth from $1.6 in the year-earlier quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for IBM for the first 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 -0.74% 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:
Lumen Technologies, Inc. LUMN is set to release quarterly numbers on May 5. It has an Earnings ESP of +27.27% and sports a Zacks Rank #1.
The Earnings ESP for Arista Networks, Inc. ANET is +2.79% and it carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on May 5.
The Earnings ESP for Alphabet Inc. GOOGL is +1.53% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on April 29.
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.
Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power .
Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.
See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
International Business Machines Corporation (IBM): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
Arista Networks, Inc. (ANET): Free Stock Analysis Report
Lumen Technologies, Inc. (LUMN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).