Analyzing International Business Machines (NYSE:IBM) Amidst Q1 Earnings and AI Prospects

Font: Financial Modeling Prep  • Apr 28, 2026

• International Business Machines (NYSE:IBM) is navigating challenges from its legacy businesses while actively pursuing growth opportunities in cutting-edge fields like artificial intelligence (AI) and quantum computing.
• Despite a recent stock price drop following its earnings report, some stock analysis suggests the market may be undervaluing IBM's potential, particularly in quantum AI, though its Q1 results present a mixed picture.
• Investor concerns are emerging due to a slowdown in key high-margin divisions like Consulting and Software, compounded by a perceived lack of detailed information from management regarding the company's future outlook.

International Business Machines (NYSE:IBM) is a long-standing technology company. It operates in areas like software, consulting, and hardware, including its well-known mainframe computers. While a major player, IBM faces challenges from its older "legacy" businesses as it competes in newer fields like artificial intelligence (AI) and quantum computing.

On April 27, 2026, analyst firm HSBC upgraded its rating on IBM to a Hold, with the stock priced at $228.05. This follows a recent price drop after its earnings report. Some stock analysis, as highlighted by 247wallst.com, suggests this drop is excessive, viewing the company's potential in quantum AI as undervalued by the market.

In its first quarter of 2026, IBM announced revenue of $15.90 billion, a 9% increase, and a Non-GAAP EPS of $1.91, as reported by Forbes. Non-GAAP EPS is a measure of profit that excludes certain one-time expenses to show ongoing financial performance. This revenue growth was led by a 12% rise in its Infrastructure division.

The strong infrastructure results come from a 48% jump in IBM Z mainframe sales. However, this is viewed as a temporary hardware refresh cycle, not a long-term trend. In contrast, the company's high-margin Consulting division, a key health indicator, saw growth of only 1%, indicating a slowdown in a key business growth area.

Concerns also exist around the software division's performance. A summary from Seeking Alpha notes disappointment in this area. It also points out that a lack of detailed information from management during its conference call is a significant concern for investors, adding to the uncertainty surrounding the company's outlook.