IBM Quantum Lead Faces Core Growth Test After 20% Drop

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•  31 Aug 2026
 

$IBM International Business Machines has fallen about 20% since July 14 while the S&P 500 has risen about 2%, even as the company remains one of the most advanced players in quantum computing. The market is currently assigning more weight to the existing business than to the quantum opportunity. Weakness began around the second quarter results and concerns about the pace of organic growth. The key issue is that corporate computing budgets are increasingly moving toward servers, AI chips and data centers, directly competing with spending that previously flowed to consulting, software and enterprise systems.

IBM continues to advance its quantum operations despite the pressure on the core business. The company plans to invest more than $10 billion in quantum computing through 2029, with the goal of building a large, fault tolerant quantum computer. It is also developing Anderon, a quantum manufacturing operation being built with support from the United States Department of Commerce, while strengthening hardware capabilities through the acquisition of operations from HRL Laboratories. The strategy is to build a quantum ecosystem around hardware, software and development tools, similar to the integrated system Nvidia built around its processors.

Barclays has previously described IBM as a type of Nvidia of quantum computing. The idea is based on the advantage of controlling both hardware and a software and developer environment. If quantum computing becomes commercially useful at scale, IBM is positioned to benefit from that transition. The opportunity is substantial, but its timing remains the central valuation issue.

Quantum revenue remains very small relative to total company revenue. As a result, even a major technological breakthrough would have limited impact on results over the next several years. Wall Street is therefore focused on Red Hat, software and consulting because those businesses currently generate the billions of dollars that drive profit and cash flow. Near term earnings momentum depends more on improvement in those existing operations than on quantum progress.

Susquehanna reflects the same view. The firm raised its price target from $225 to $235 while maintaining a Neutral rating. Analysts see the progress in quantum computing as interesting, but a meaningful change in valuation requires improvement in the core business as well. Multiple expansion therefore remains tied to stronger operating performance in businesses that already contribute materially to revenue and cash flow.

IBM benefits from leadership in quantum computing while AI creates competition for customer technology budgets and pressures parts of the older consulting model. The quantum business could become very large within several years, but investors are currently looking for stronger growth from Red Hat, improvement in consulting and a faster pace in software. Those are the numbers capable of moving the stock before quantum computing becomes a product generating billions of dollars.

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