IBM Expands AI Consulting Capabilities: Will it Drive Growth?

International Business Machines Corporation IBM announced that it has expanded its collaboration with Microsoft Corporation MSFT to augment its consulting capabilities. IBM’s multi-model, multi-framework AI platform, IBM Consulting Advantage, combines IBM expertise and skills to supports consultants and clients worldwide with AI assistants, agents and applications. In the current venture with Microsoft, IBM is set to integrate Microsoft’s Copilot with the IBM Consulting Advantage. This will allow IBM-certified consultants to access the IBM AI platform from within Microsoft 365 apps such as Word, Excel, PowerPoint, Teams and Outlook.

IBM boasts comprehensive industry-specific capabilities that help in designing and developing secure and the most advanced cloud-based solutions. Combining this with Microsoft AI and cloud portfolio will empower businesses to streamline workflow and improve their business outcomes. 

Using the integrated tool, IBM consultants were able to generate the equivalent of more than 250,000 hours saved annually or $35 million in value. It frees up resources and allows consultants to work on other revenue-generating tasks and improve the company’s profitability. It streamlines the AI adoption process for enterprises.
 
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. With the recent integration of IBM Consulting Advantage with MSFT Copilot, IBM is in better position to capitalize on this emerging market trend.

In the third quarter, IBM generated $5.32 billion in revenues from the Consulting segment, up from $5.15 billion a year ago. The uptick was driven by growth in business application transformation, application modernization and migration, and application operations. The segment’s revenues beat our estimate of $5.19 billion. Per our estimate, IBM set to generate $21.2 billion in revenues from Consulting indicating a 2.5% year over year growth.

How Are Competitors Faring?

IBM faces competition from Accenture ACN and Infosys Technologies INFY in the consulting space. Growing spending on application modernization and maintenance, cloud enablement and cybersecurity-as-a-service boasts a solid growth opportunity for Accenture. The company recently formed a strategic collaboration with Microsoft to launch a copilot business transformation practice to help enterprise accelerate and scale AI adoption. In the fourth quarter, Accenture benefited from healthy demand in financial services, communication, media and technology domain.

Infosys is benefiting from solid customer wins and fast-growing digital services. 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 organization develop AI native solutions. In the recent quarter, Infosys witnessed healthy traction across multiple end markets such as manufacturing, financial services, communication, energy, utilities and others.

IBM’s Price Performance, Valuation and Estimates

IBM stock has surged 37.9% over the past year compared with the industry’s growth of 65.6%.

Going by the price/earnings ratio, IBM’s shares currently trade at 24.19 forward earnings, above 23.39.

The Zacks Consensus Estimate for IBM’s earnings for 2025 has risen over the past 60 days.

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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This article originally published on Zacks Investment Research (zacks.com).

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