The Open Question Under IBM Stock
For questions about this article or underlying research, email help@trefis.com.
International Business Machines (IBM) sells large companies the work of putting AI to use. Management credits client demand for that work with the growth in its consulting business. The risk is that those clients grow wary of what their AI spending returns and cut back. You cannot yet tell whether that wariness has started to reach IBM’s sales.
Where IBM Would Feel A Pullback In AI Spending
The place to look is IBM’s consulting business. Management said consulting revenue grew 2% in the third quarter of 2026, excluding currency moves, reflecting continued client demand for AI-enabled transformation. Management has also said larger enterprises are becoming much more aware of the true return on their AI spending, and that some worry part of it has run out of control with no real return. The spending that management credits for consulting’s growth is the same spending clients are now looking at harder.
Analysts are asking about it. On IBM’s October 21, 2026 call, eight analysts asked questions, and three of them asked about AI. One of them raised the doubt directly, asking whether clients had held back on deals after finding that some AI systems could not do what was claimed for them.
How Big Is IBM’s Consulting Business?
Consulting brought in $21.1 billion in fiscal 2025, about 31% of IBM’s total revenue that year. Only Software was larger, at $30.0 billion. Consulting revenue grew 1.8% in fiscal 2025, after a 0.9% fall in fiscal 2024. That is far slower than Software, which grew 10.6% that year. These yearly figures are as reported in IBM’s annual filings, unlike the third-quarter rise above. A pullback in clients’ AI spending would hit the AI work within consulting. Consulting is nearly a third of IBM’s sales, and it is a business that has only just returned to growth.
Has IBM’s Management Answered The Doubts On AI?
Management has answered in part. It said that the productivity gains from AI are very real, and that a lot of people underplay how much work it takes to fit AI into their workflows. That work is the kind of AI-enabled transformation management credits for consulting’s growth.
On the October 21 call after the third quarter, management said it expects consulting revenue growth to pick up to low to mid-single digits for 2026, citing backlog quality and momentum in GenAI. Asked about software, management said it did not want to comment on 2027 growth yet. It said it would quantify its early thinking on software and IBM as a whole in January. Until then, consulting revenue growth, against that guide of low to mid-single digits for 2026, is the number to watch in IBM’s next report, expected in January 2027.
Want A Second Look At What You Own?
International Business Machines is one decision in a portfolio. Whether you work with an advisor or manage your money yourself, a second look at the whole portfolio costs nothing. Our partner advisory firm offers a free written review of your holdings, fees and income plan, with no need to switch.
Spot an error or want more like this? Tell us in 10 seconds.