IBM’s Two-Track Bet: Software Revenue Today, Quantum Payoff Tomorrow

IBM investors are getting a rare glimpse of a company simultaneously executing on two very different time horizons. The 115-year-old technology giant is leaning into near-term software growth—enough to earn a top-pick rating from Bank of America ahead of its July 22 earnings report—while also committing more than $10 billion to a quantum-computing roadmap that won’t bear fruit until 2029.

The duality is reflected in a stock that has recovered steadily from its May low but still sits 13.8% below a 52-week high of $292.85 set on June 1. At Friday’s close of $252.40, shares have gained 7.3% over the past 30 days and trade roughly 10% above their 50-day moving average of $228.35. The 200-day line at $237.08 sits 6.5% lower, confirming a constructive but not overheated trend. A relative strength index of 56.4 leaves room for movement in either direction, while the annualized 30-day volatility of 43.6% suggests the market is still calibrating how much of the long-term quantum narrative should be priced in now.

Bank of America is betting the near-term story wins out. The firm named IBM one of its top picks ahead of second-quarter results due on July 22, projecting revenue of $18.0 billion and earnings per share of $3.03. It expects IBM to raise its full-year 2026 guidance on both revenue and free cash flow, citing faster-than-expected synergies from the Confluent acquisition, plus momentum in software and storage infrastructure. The bank sees IBM’s deliberate shift toward higher-margin software—bolstered by deals—as the key driver of free cash flow and the foundation for eventual quantum upside.

Should investors sell immediately? Or is it worth buying IBM?

That software push already has a tangible face. On July 9, IBM updated its coding tool Bob with multi-agent functions and pre-built workflows designed to modernize legacy systems. The move targets a bottleneck identified by 85% of DevSecOps professionals: the constraint is no longer writing code but reviewing it. Two days earlier, the company expanded its z17 mainframe platform to bring artificial intelligence directly to customers’ most critical transactions and data.

Taken together, the moves form a coherent strategy: monetize AI and software on existing infrastructure today to fund the next computing generation tomorrow. That generation is quantum computing. On June 2, IBM unveiled plans to invest more than $10 billion over five years in quantum research, manufacturing, and capacity. The first major milestone is “IBM Quantum Starling,” a system slated for 2029 that will deliver 20,000 times more computing operations than current machines. A follow-on machine called “Blue Jay” targets a billion quantum operations across 2,000 qubits. The company already operates the world’s largest fleet of quantum computers and the most widely used quantum software, with more than 340 organizations running real workloads. CEO Arvind Krishna has been emphatic: “The quantum era has already begun.”

Yet the market remains measured. IBM’s year-to-date gain stands at just 1.5%, and the 12-month return is 3.7%. Analysts’ average price target of $257.99 implies only about 2% upside from current levels—a remarkably restrained verdict for a company balancing two decade-defining bets. The message is clear: a cautious vote of confidence, not euphoria. With the July 22 earnings call positioned as a test of whether IBM’s transformation into a higher-margin software powerhouse can justify another guidance hike, the next few weeks will reveal whether the near-term story can sustain the stock while the long-term quantum payoff remains years away.