Inside the Business Segments

IBM’s latest report shows a company with multiple engines running at different speeds:

• Software: $7.2 billion (+10%), broadly in line with expectations. This includes Red Hat and AI-aligned offerings.
• Infrastructure: $3.56 billion (+17%), ahead of the ~$3.46 billion estimate, powered by demand for IBM Z mainframes.
• Consulting: $5.3 billion (+3%), showing steadier, lower growth.

One number IBM really wants investors to notice: its “AI book of business.” That pipeline now exceeds $9.5 billion, up from about $7.5 billion reported in July. Roughly 80% of those AI contracts come from consulting work, with the rest from software. Even more interesting: around 80% of the ~300 AI customers IBM is currently working with are new clients onboarded in just the last two quarters. That signals accelerating enterprise appetite for AI deployment services — and IBM still has deep credibility in regulated, complex industries.

Free Cash Flow and the HashiCorp Deal

Under the surface, IBM remains financially sturdy. The company is targeting roughly $14 billion in free cash flow for 2025, giving it room to invest and acquire. One of the most important recent strategic moves: the $6.4 billion acquisition of HashiCorp, a cloud infrastructure automation specialist. IBM announced the deal at $35 per share in cash and has moved forward with integration.

The logic behind the acquisition is straightforward: HashiCorp’s tooling (Terraform, Vault, etc.) helps large enterprises automate and secure hybrid and multi-cloud environments — exactly where IBM wants to lead, alongside Red Hat and its watsonx AI platform. IBM completed the HashiCorp acquisition after clearing U.S. and U.K. regulatory review, and now positions HashiCorp as a core building block of its end-to-end hybrid cloud and AI stack.

IBM’s Quantum Ambition: The Next “ChatGPT Moment”?

In April, the Wall Street Journal argued that now that IBM has emerged from “a long stretch of mediocrity,” it needs to prove itself in AI. But some investors believe the real breakout moment won’t be AI at all — it will be quantum computing.

IBM has spent years positioning itself as a leader in building universal quantum computing systems. The company has publicly stated plans to launch a large-scale quantum computer by 2029. That long-term vision isn’t just marketing: when investors were reminded of IBM’s quantum roadmap, the stock jumped about 8% in a single session and touched a new all-time high. (This rally followed headlines linking IBM’s quantum error-correction research to AMD hardware.)

Reuters recently reported that IBM has successfully run a quantum error-correction algorithm on AMD’s FPGA chips — a milestone later confirmed to CNBC by an IBM spokesperson. In parallel, Google announced that one of its in-house quantum systems can run certain workloads up to 13,000× faster than classical supercomputers, reinforcing the idea that quantum is transitioning from science fiction to industrial capability.

Quantum Computing Is Now Geopolitical

The race to dominate quantum computing isn’t just commercial anymore — it’s strategic. According to reporting in The Wall Street Journal, the U.S. government is exploring direct federal stakes in quantum companies such as IonQ, Rigetti Computing, and D-Wave Quantum, each seeking at least $10 million in backing. Other firms, including Atom Computing, are reportedly open to similar structures.

While the U.S. Department of Commerce has officially denied that negotiations are active, sources cited in those reports claim talks are already in advanced stages. The idea fits into a broader U.S. strategy: securing influence in “critical” technologies that have national security implications, not just commercial upside.

There’s precedent. The U.S. has recently taken partial stakes in areas seen as strategically vital — including a reported 15% position in rare-earth producer MP Materials and around 10% in Intel to support domestic semiconductor production. Quantum could be next in line.

Why the urgency? China is estimated to be investing roughly 2× more than the United States in quantum computing, according to the Quantum Economic Development Consortium. The message from Washington is simple: quantum is no longer optional. It’s infrastructure.

So Where Does That Leave IBM?

IBM sits at the crossroads of three defining tech frontiers:

• Hybrid cloud & Red Hat — still strategic, but now under scrutiny due to slowing growth.
• Enterprise AI services — a $9.5B+ pipeline, mostly consulting-driven, with a surge of new clients in just two quarters.
• Quantum computing — a moonshot that could reshape entire industries, from drug discovery to materials science, and may attract direct government backing.

Investors punished the stock for softer momentum in hybrid cloud, but long-term, IBM is trying to prove it’s no longer just a legacy mainframe company. It wants to be the infrastructure layer for the next era: AI at scale, automated multi-cloud, and commercially viable quantum.

That’s not a short-term trade. That’s a strategy for the next decade.