HSBC Holdings PLC has elevated its rating for technology leader IBM from "Reduce" to "Hold," citing improvements in profitability and valuation. Analyst Stephen Bersey referenced IBM's recent performance in a client note, stating, "The non-GAAP operating margin reached 15.7%, a year-over-year increase of 195 basis points, surpassing expectations by approximately 85 basis points." He further noted, "Non-GAAP operating profit amounted to $2.505 billion, exceeding both HSBC's forecast and consensus estimates by about 7%." Since 2023, IBM has achieved $4.5 billion in productivity savings and anticipates an additional $1 billion in savings by 2026. HSBC indicated that the company has reaffirmed its previous performance guidance for 2026. It continues to project constant currency revenue growth exceeding 5% for that year, while highlighting that software business growth could surpass 10% (up from a prior estimate of 10%), aided by the earlier-than-expected completion of the Confluent acquisition. Although the Confluent acquisition may dilute margins, the non-GAAP pre-tax profit (PBT) margin is still expected to increase by approximately 1 percentage point year-over-year. Bersey also pointed out that IBM's quantum computing business appears poised to deliver a first-mover advantage. "Management emphasized that the company remains on track to deliver its first large-scale fault-tolerant quantum computer by 2029, and IBM's partners are expected to demonstrate the first 'quantum advantage' use cases this year using IBM's hardware," he added.
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