IBM Consulting Rebounds Slightly: Is AI Enough to Fuel Durable Growth?

International Business Machines Corporation IBM is witnessing early signs of recovery in the Consulting segment. During the fourth quarter, IBM reported revenues of $5.35 billion compared with $5.17 billion a year ago, with increased demand for AI services, growth in business application transformation, application modernization and migration, and application operations. Segment profit increased to $658 million from $606 million for respective margins of 12.3% and 11.7%.

Businesses are moving from experimentation to enterprise-scale AI deployment. IBM Consulting boasts comprehensive industry-specific capabilities that are helping businesses execute their AI adoption initiatives. Per a report from Future Market Insights, the AI consulting services market is projected to witness a 26.2% compound annual growth rate between 2025 and 2035. IBM is expanding its portfolio with innovation and strategic collaboration to capitalize on this market trend.

IBM has formed a collaboration with Microsoft to augment its consulting capabilities. IBM is integrating Microsoft’s Copilot with IBM’s multi-model, multi-framework AI platform, IBM Consulting Advantage, to boost the efficiency of IBM consultants. The company is also collaborating with NVIDIA. By incorporating NVIDIA's GPU-native technologies with IBM’s watsonx.data, watsonx.ai and storage solutions, IBM aims to accelerate enterprise AI adoption. Such initiatives bode well for sustainable growth.

However, growing geopolitical unrest and global macroeconomic headwinds can impact its growth prospects. These factors can constrain enterprise decisions on AI-related spending in the near term.

How Are Competitors Faring?

IBM faces competition from Accenture ACN and Infosys Technologies INFY in the consulting space. During the recent quarter, Accenture’s Consulting revenues increased 4% year over year on a reported basis and 3% in local currency to $9.4 billion. Consulting bookings were $9.9 billion. Growing spending on application modernization and maintenance, cloud enablement and cybersecurity-as-a-service boasts a solid growth opportunity for Accenture.

Infosys’ revenues increased 3.2% year over year to $5.1 billion in the recent quarter. It is expanding its gen AI portfolio to capitalize on the growing opportunities in this domain. The company is collaborating with industry leaders, such as Google and Microsoft, to help organizations develop AI native solutions. Infosys is acquiring Optimum Healthcare IT and Stratus to build industry-specific consulting capabilities.

IBM’s Price Performance, Valuation and Estimates

IBM stock has declined 4.6% over the past year against the industry’s growth of 91.6%.

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Going by the price/earnings ratio, IBM’s shares currently trade at 18.83 forward earnings, above 9.3.

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The Zacks Consensus Estimate for IBM’s earnings for 2026 and 2027 has risen over the past 60 days.

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IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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