International Business Machines (IBM) is a global leader in technology and consulting and is now boldly advancing quantum computing solutions. The company has announced its commitment to develop the world’s first large-scale, fault-tolerant quantum computer, Quantum Starling, which is set to be released by 2029. 

Amidst this news, IBM’s shares rose for nine straight sessions, with several days seeing gains over 1%, pushing the stock to new all-time highs. This surge ties into wider growth in the quantum industry, with investment in quantum computing companies hitting $1.25 billion in the first quarter of 2025 alone, more than double the amount from the same period last year.

With the global quantum market expected to grow 27% this year to $1.88 billion, IBM’s recent rally adds to this positive outlook. 

Is now the right time to buy into IBM’s quantum vision, or is caution warranted at these record highs? Let’s dive in.

IBM’s Q1 Performance

In the first quarter of 2025, IBM brought in $14.5 billion in revenue, which is up 1% from last year. The company’s software business was the main driver of growth, with revenue rising 7%, thanks to strong performances in hybrid cloud, automation, and data services. 

Alongside this growth, IBM returned $1.5 billion to shareholders in dividends during the quarter, supported by an annual dividend rate of $6.72 and a yield of 2.38%.

IBM’s stock has climbed 28.4% so far this year and 66.8% over the past 52 weeks. 

The company holds a market capitalization of $257.7 billion, with a forward price-earnings ratio of 25.7x, showing that investors are confident in IBM’s plans for growth. 

As mentioned above, software revenue grew 7% in the first quarter. Hybrid cloud revenue, led by Red Hat, went up 12%, while automation and data services grew by 14% and 5%.

Consulting revenue dropped 2% and hybrid infrastructure revenue fell 6%, showing there are still some challenges in those areas. However, its profit margins improved, with the GAAP gross profit margin rising to 55.2% and the non-GAAP operating margin up to 56.6%. IBM generated $4.4 billion in cash from operating activities and had $2.0 billion in free cash flow.

The company ended the quarter with $17.6 billion in cash, restricted cash, and marketable securities, which is $2.8 billion more than at the end of 2024. Total debt, including $10 billion from IBM Financing, rose to $63.3 billion. IBM also spent $7.1 billion on acquisitions, including the HashiCorp deal, to boost its cloud and security offerings. 

Catalysts Driving IBM Growth

The company plans to build the world’s first large-scale, fault-tolerant quantum computer, IBM Quantum Starling, by 2029. This system, to be housed at a new Quantum Data Center in Poughkeepsie, New York, is expected to perform 20,000 times more operations than current quantum machines. 

Starling will execute 100 million quantum operations using 200 logical qubits, a leap that could transform industries such as drug discovery, materials science, and optimization. IBM is already planning Quantum Blue Jay, a successor designed to handle 1 billion quantum operations with 2,000 logical qubits, reinforcing its leadership in this revolutionary technology.

Complementing this quantum push is IBM’s $6.4 billion acquisition of HashiCorp, completed in early 2025. HashiCorp’s products, Terraform and Vault, are now integrated with IBM’s Red Hat and watsonx platforms, enhancing cloud infrastructure management and hybrid cloud security. 

This addresses the increasing complexity enterprises face in managing cloud workloads. HashiCorp’s expertise in infrastructure and security lifecycle management aligns perfectly with IBM’s AI-driven automation and data security growth strategy.

IBM’s cloud ambitions also gained momentum through its expanded partnership with Amazon Web Services. The new Innovation Lab in Bucharest, Romania, serves clients from 22 countries, deploying IBM’s latest AI solutions, including agentic and generative AI, built on AWS services like Amazon Bedrock and SageMaker. 

Further advancing AI, IBM launched watsonx AI Labs in New York City, a developer-focused hub accelerating AI adoption by co-creating agentic AI solutions with startups and enterprises. This initiative includes acquiring technology from Seek AI, a startup specializing in AI agents for enterprise data. 

Rounding out these catalysts is IBM’s $150 billion investment plan announced in April 2025, with over $30 billion dedicated to R&D for advancing American manufacturing of mainframes and quantum computers. CEO Arvind Krishna emphasized this commitment ensures IBM remains the center of the world’s most advanced computing and AI capabilities.

Analyst Views on IBM’s Path Forward

For its ongoing quarter, analysts project earnings per share of $2.64 for the current quarter, up 8.64% year-over-year. For the full year they forecast EPS of $10.95, up 6%.  

The company maintains its guidance for at least 5% constant-currency revenue growth in 2025. For the second quarter, IBM projects revenue between $16.4 billion and $16.75 billion, slightly above consensus estimates, reflecting optimism about its core businesses despite a cautious macroeconomic backdrop. 

Wall Street analysts are broadly optimistic about IBM’s future, with all 20 surveyed rating the stock a “Moderate Buy.” However, the average price target stands at $250.74, below its current trading price. 

Conclusion

IBM’s groundbreaking advances in quantum computing and AI have clearly energized the stock, but with shares trading near all-time highs, the potential upside looks limited. Analysts’ average price target of $250.74 suggests a possible pullback from the current level too. 

The stock is likely to experience some consolidation or modest correction before resuming any meaningful upward momentum. Investors should consider waiting for a more attractive entry point before jumping in.

On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.