International Business Machines Corp (NYSE:IBM) is set to report its first quarter earnings this week, with Jefferies analysts expecting steady growth overall and the potential upside driven by its software business.
The analysts believe IBM could exceed Wall Street expectations for software, where consensus forecasts call for roughly 11% year-over-year growth. That estimate represents a slowdown from the prior quarter, but the analysts argued the comparison period is relatively easy and may understate momentum.
Additional support could come from the earlier-than-anticipated closing of assets tied to Confluent, as well as conservative assumptions around Red Hat, which is modeled to grow about 10%.
Outside of software, trends appear more moderate. Infrastructure revenue is expected to increase around 8%, down from stronger growth in the previous quarter tied to product cycle dynamics, while consulting is projected to expand by roughly 4%. Taken together, consensus estimates imply total revenue growth of about 7% year over year and free cash flow margins near 13% for the quarter.
Looking further ahead, analysts point to potential reacceleration into 2026, supported by synergies from acquisitions and continued demand tied to IBM’s mainframe ecosystem.
The company’s entrenched position in enterprise IT is also seen by some as a foundation for benefiting from emerging artificial intelligence applications, particularly those embedded within existing business workflows.
At the same time, questions remain about the pace of AI adoption within IBM’s software portfolio, with some observers noting that demand has been more concentrated in consulting engagements than in platform usage. Others caution that ongoing acquisition activity can make it more difficult to assess underlying organic growth trends, according to Jefferies.
IBM shares currently trade at about 17 times projected 2027 free cash flow, broadly in line with recent historical averages but below the valuation of many large-cap software peers. Shares of IBM were little changed at $253 on Monday afternoon.
Jefferies sees room for multiple expansion if software growth accelerates and execution remains consistent, setting the stage for the upcoming earnings report to serve as an important gauge of momentum.
IBM will report its Q1 earnings on April 22.