IBM Just Made a Bold Quantum Computing Bet

Artificial intelligence has been ruling the tech investment sector over the past two years; however, another revolutionary computing platform has also been steadily evolving in the background. Though quantum computing is years away from mass commercial adoption, the race towards building a functional, fault-tolerant quantum computing platform has been gaining speed due to massive funding from governments and big tech companies.

In continuation of its ambitious plans to become the leader of the race, IBM (IBM) announced that it would be acquiring HRL Laboratories, which specializes in quantum computing. While the details of the deal were not revealed, this move would provide IBM with additional know-how in silicon-spin qubits, following the recent commitment of the company to spend more than $10 billion on quantum technologies in the next five years. The news was released right after IBM provided investors with its second-quarter earnings report and an update on the annual forecast.

About IBM Stock

IBM is one of the leading global companies operating within enterprise technology and providing software, consulting, infrastructure, hybrid cloud, artificial intelligence, and quantum computing services to business organizations and governments worldwide. Headquartered in Armonk, NY, IBM currently holds a market capitalization of about $201 billion, thus being one of the largest providers of diversified enterprise software and infrastructure.

However, the impressive position of IBM in enterprise technology does not mean good performance for IBM shares. Currently, IBM stock trades 35% below the 52-week high of $332.46, even though it is up 8.2% from the 52-week low. This underperformance is clearly seen when comparing it to the strong, roughly 16%, performance of the S&P 500 Index ($SPX), which shows investor preference for faster-growing stocks, related to AI infrastructure.

As for the valuation, IBM looks quite undervalued in comparison with many other peers operating within the AI technology space. The company's shares trade at approximately 17 times future earnings and 2.9 times revenues. These multiples are far below the expensive multiples of software companies, enjoying the current popularity of AI, implying that investors remain cautious about IBM revenue growth potential.

Nevertheless, IBM stock may look quite attractive for income-oriented investors since the company continues paying one of the highest dividends among all other technology companies, backed by a strong generation of free cash flows.

IBM Reinforces Its Quantum Ambitions After Earnings

IBM released its second-quarter 2026 results on July 22 and slightly lowered its full-year revenue expectations. Management now projects constant-currency revenue growth of 4% to 5% in 2026 and also forecasts the free cash flow to grow by approximately $1 billion compared to 2025.

While the softer-than-expected guidance for revenue disappointed the investors, management highlighted a few positive factors. In particular, Red Hat, watsonx, HashiCorp, and Confluent continue showing excellent growth. Moreover, the demand for Power Systems and Storage products reached record highs, driving backlog to nearly $500 million. In addition, IBM is planning to increase sales coverage, hire additional AI specialists, and implement productivity programs through AI and automation.

The acquisition of HRL Laboratories once again confirms the company's strategy of spending heavily on emerging technologies despite the ongoing macroeconomic challenges. Indeed, HRL specializes in silicon-spin qubit engineering, quantum sensing, and quantum networking that may help IBM expand its research portfolio in its attempt to achieve the ambitious goal of becoming the producer of the world's first large-scale fault-tolerant quantum computer by 2029.

In addition, IBM recently announced its plan to develop Anderson, which is going to become the world's first quantum wafer foundry in cooperation with the U.S. Department of Commerce, once again demonstrating its commitment to quantum computing that remains one of the key priorities of the company's management. Although commercial adoption remains a few years away, IBM seems to be highly determined to become a technological leader before reaching the critical market size.

What Do Analysts Expect for IBM Stock?

Wall Street remains optimistic with a “Moderate Buy” rating consensus on IBM despite it not really being a high-growth AI stock anymore. Analysts remain constructive due to the improving software mix, expanding free cash flow, and high dividend yield of the company, although the weaker-than-expected revenue projections somewhat limit their optimism.

The average target price of $256.91 implies an upside of approximately 18% to the current level of shares trading around $218. The highest analyst target is $365, whereas the lowest is $174, thus showing different attitudes towards how fast the investments of IBM in AI and quantum computing would lead to earnings growth.