Will Healthy Consulting Revenue Growth Benefit IBM's Q4 Earnings?

International Business Machines Corporation IBM is scheduled to report fourth-quarter 2025 earnings on Jan. 28, 2026. In the to-be-reported quarter, the company is likely to have recorded higher revenues from the Consulting segment, backed by rising demand for technology consulting and business transformation services.

Factors at Play

The Consulting segment comprises Strategy and Technology (previously reported as Business Transformation and Technology Consulting) and Intelligent Operations (previously reported as Application Operations). It provides consulting and application management services that offer value and innovation to clients by leveraging industry, technology and business strategy and process know-how.

During the to-be-reported quarter, IBM extended its multi-year partnership 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 support consultants and clients worldwide with AI assistants, agents and applications. 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 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 profitability. It streamlines the AI adoption process for enterprises. These are likely to have generated additional revenues for the Consulting segment.

Overall Expectations

The Zacks Consensus Estimate for Consulting revenues is pegged at $5.43 billion, indicating an improvement from $5.17 billion in the year-ago quarter. 

The Zacks Consensus Estimate for total revenues for the company stands at $19.22 billion. It generated revenues of $17.55 billion in the prior-year quarter. The consensus mark for earnings is currently pegged at $4.33 per share, indicating growth from $3.92 in the year-earlier quarter.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for IBM for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. 

IBM currently has an ESP of 0.00% with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Advanced Micro Devices, Inc. AMD is set to release quarterly numbers on Feb. 3. It has an Earnings ESP of +2.01% and carries a Zacks Rank #3. 

The Earnings ESP for Cirrus Logic, Inc. CRUS is +5.90% and it sports a Zacks Rank of 1. The company is scheduled to report quarterly numbers on Feb. 3.

The Earnings ESP for Alphabet Inc. GOOGL is +0.49% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Feb. 4.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research