IBM

Arvind Krishna has been pretty disciplined about the portfolio since taking over in 2020. The Kyndryl spinoff removed a massive drag on margins, the QRadar divestiture was smart, and the HashiCorp acquisition actually fits the strategy. Whatever you think of the stock, the capital allocation is coherent in a way it wasn't under Rometty.

IBM Consulting revenue growth has been decelerating for three straight quarters and nobody wants to admit it. Accenture is eating their lunch in AI transformation projects and the talent IBM needs to compete is going to hyperscalers. This isn't the same company that competed on research alone.

IBM's gross margin on software is sitting above 80% and that segment is now more than 40% of total revenue. As the consulting mix shrinks and software grows, the blended margin profile of this company looks completely different in three years than it does today. The re-rating hasn't happened yet.

Does anyone have a good read on how watsonx is actually being adopted outside of IBM's own case studies? I keep seeing the press releases but I want to know if real enterprise customers are deploying it at scale or if it's mostly pilots.

It's interesting that IBM is one of the few large tech companies that actually benefits when CIOs slow down discretionary spending. Their managed services and infrastructure support contracts are the first call when a company needs to cut headcount but keep systems running. Counter-cyclical in a weird way.

IBM and Palo Alto Networks announced an expanded partnership in late 2024 to integrate QRadar SIEM capabilities with Palo Alto's Cortex XSIAM platform. This follows IBM's earlier decision to sell the QRadar SaaS business to Palo Alto, with IBM Consulting taking on implementation work for joint customers.

IBM reported Q3 2024 results with software revenue growing 10% year over year, driven largely by Red Hat and the hybrid cloud platform. Total revenue came in at roughly $14.97 billion, slightly above consensus. Free cash flow guidance for full year 2024 was reaffirmed at around $12 billion.

I've been watching IBM try to execute the hybrid cloud pivot for five years now and the market share data just doesn't show it working. AWS, Azure, and Google have 65% of cloud infrastructure and IBM's share is barely registering. Red Hat is great but it runs on other people's clouds, which means IBM doesn't capture the infrastructure economics.

How exposed is IBM to any potential slowdown in enterprise AI spending if we hit a recession? I know they have long-term contracts but I'm trying to figure out which revenue lines are actually at risk versus locked in.

The HashiCorp acquisition closing is a bigger deal than the market priced in. Terraform is the de facto standard for infrastructure-as-code in hybrid environments, which is exactly where IBM's entire Red Hat OpenShift strategy lives. This is a genuine platform lock-in play.

IBM's consulting segment is quietly becoming a monster. They just signed a multi-year deal with the US federal government to modernize legacy mainframe infrastructure, and nobody is talking about it. When the rest of tech is fighting over AI hype, IBM is actually getting paid to implement it in regulated industries that can't just spin up AWS.

IBM's mainframe business, the z16, is a cash cow but it's a melting ice cube at the enterprise level. Every quarter more banks and insurers are running modernization programs to move at least some workloads off Z-series. When the z17 cycle launches it'll get a bump but the secular trend is not favorable.