IBM's software business is experiencing accelerated growth, with the company providing a strong long-term revenue guidance.

IBM (IBM.US) recently announced its revenue growth guidance for the next few years, exceeding market expectations, mainly due to the continued expansion of its software business. IBM Chief Financial Officer Jim Kavanaugh said in a speech on Tuesday that the company's long-term sales would grow at more than 5% annually. Kavanaugh did not specify the number of years covered by the forecast, but analysts generally expect a growth rate of about 4% in fiscal 2026 and 2027, on a constant currency basis. IBM is transforming from a traditional computer company to a focus on software and services in recent years. The company has extended its product line through a series of acquisitions, including the proposed acquisition of HashiCorp Inc. (HCP.US) announced in April this year, and the acquisition of Apptio in 2023 for $4.6 billion. The stock rose 1.43% to $264.46 at the close of Tuesday after the announcement, following a 13% surge on January 30 to a record high, fueled by enthusiasm for IBM's strong fourth-quarter performance (driven by its software business) and its forecast of "at least 5% growth" in 2025 revenue. Kavanaugh further revealed that the long-term revenue of the software business would grow at about 10% annually, higher than the previous analyst expectation of 7%-9% growth by 2027. The infrastructure segment would achieve 1%-3% growth, and is expected to generate revenue from quantum computing in the latter part of this decade. Regarding the consulting business, which has underperformed recently, Kavanaugh said its growth would exceed the market average. "The consulting market is undergoing a transformation with the technological change of generative AI." Anurag Rana, an analyst at Bloomberg Intelligence, wrote that the revenue guidance seems "slightly conservative" considering IBM's strength in the software field. Meanwhile, the outlook for the consulting business suggests that its growth "may not rebound in the short term."