IBM Will Prosper in AI and Quantum Computing

IBM continues to recover from its 25% share-price drop in early July 2026. The plunge came after the company announced lower-than-expected results for the second quarter,

We feel IBM can overcome its challenges. The company is a pioneer in AI, and has a long history of adapting to changing technologies. For example, it has now teamed up with leading banks and other financial services providers to identify and eliminate vulnerabilities in its software that AI could target. The company also stands to gain from new quantum computing technologies, which are much faster than current computers.

IBM (New York symbol IBM; www.ibm.com) is a global technology and consulting company that provides hybrid cloud, AI software, IT infrastructure (including mainframes), and enterprise consulting services.

The stock continues to recover from its 25% share-price drop in early July 2026. The plunge came after the company announced lower-than-expected results for the second quarter ended June 30, 2026.

That’s because many of its business customers are shifting their spending on technology to products they need to handle artificial intelligence (AI) programs such as servers and memory chips. As a result, they spent less on IBM’s mainframe computers and consulting services.

Businesses are also spending more on cybersecurity software instead of IBM’s services. That’s in response to fears that AI-powered tools could make it easier for criminals to access sensitive data.

As a result, the company was unable to conclude many sales contracts.

IBM’s revenue in the quarter rose 1.1%, to $17.16 billion from $16.98 billion a year earlier. That missed the consensus forecast of $17.58 billion.

Thanks to a plan to improve productivity, earnings before unusual items gained 5.3%, to $2.79 billion from $2.65 billion. Due to more shares outstanding, per-share earnings rose 4.6%, to $2.93 from $2.80. However, that also fell short of the $2.97 consensus estimate.
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IBM’s bright outlook prompts another dividend hike

We feel IBM can overcome these challenges. The company is a pioneer in AI, and has a long history of adapting to changing technologies. For example, it has now teamed up with leading banks and other financial services providers to identify and eliminate vulnerabilities in its software that AI could target.

The company also stands to gain from new quantum computing technologies, which are much faster than current computers. With support from the U.S. Department of Commerce, IBM aims to build a new large-scale quantum computer (called Anderon) by 2029.

In fact, its bright outlook is why the maker of mainframe computers and software raised your quarterly dividend by 0.6% with the June 2026 payment, to $1.69 a share instead of $1.68. The new annual rate of $6.76 yields a solid 2.9%. IBM has paid regular dividends since 1916 and has increased the annual rate each year for the past 31 years.

The stock now trades at 19.4 times the $12.06 a share that IBM will probably earn for all of 2026. That’s a low multiple considering its high research costs (13.5% of revenue in the latest quarter).

Recommendation in Canadian Wealth Advisor: IBM Corp. is a buy.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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