Expect AI, Confluent opportunities, a z17 sales cycle update and other subjects to come up Wednesday.
IBM’s opportunities from its $11 billion Confluent purchase. Progress in the z17 mainframe selling cycle. And how disruptive artificial intelligence upstarts like Claude maker Anthropic are to IBM’s business.
These are some of the biggest topics expected to come up Wednesday when the Armonk, N.Y.-based technology giant discloses first fiscal quarter earnings, covering the three months ended March 31.
IBM should see about $16.2 billion in revenue for the quarter, up 7.1 percent year on year ignoring foreign exchange, according to a Morgan Stanley report this month. The investment firm previously expected $15.8 billion in revenue and now expects revenue 4 percent above Wall Street’s estimates.
[RELATED: IBM Completes $11 Billion Confluent Acquisition]
IBM Q1 Earnings
Even if IBM beats revenue expectations in a variety of its businesses, the vendor is unlikely to increase its revenue forecast for the 2026 calendar year and its free cash flow expectations, according to the Morgan Stanley report.
IBM should forecast $17.9 billion of revenue for its second fiscal quarter, which would be up 5.6 percent year on year. The investment firm increased its estimate from $17.5 billion and now expects revenue 1 percent higher than Wall Street. For 2026, IBM should forecast $72 billion in revenue, Morgan Stanley said in its report. It also expects a free cash flow forecast of $15.8 billion.
IBM and various divisions of its portfolio, including Confluent and Red Hat, have been investingin their partner programs to seize opportunities in AI, data streaming and hybrid cloud.
Red Hat, for example, is looking to add core sales training, core technical training, sales tools and other capabilities throughout the year to help partners with its AI portfolio, according to CRN’s 2026 Partner Program Guide.
Confluent this year looks to increase the overall percentage of company revenue that comes through the channel and increase the amount of professional services going through partners, according to CRN’s 2026 Channel Chiefs.
Read on for what IBM Chairman and CEO Arvind Krishna and IBM’s leadership are expected to discuss Wednesday during the vendor’s latest quarterly earnings report.
Software Outlook: Early Confluent Impact
IBM’s transformation over the years from mainly hardware business to software comes as the enterprise software industry faces new risks from Claude maker Anthropic and other AI upstarts that appear able to jump into new parts of the industry at a whim.
Innovations this year from Anthropic have disrupted cybersecurity vendors as well as companies that make Software as a Service, like IBM, leading to this year’s “SaaSpocalypse” of software stocks falling whenever Anthropic publishes new capabilities for its AI tools.
One thing going for IBM’s software business compared with others is a portfolio of products that are priced by consumption and workload, with AI apparently more disruptive to seat-based pricing companies such as Microsoft and Salesforce due to AI’s potential to reduce the number of employees organizations need, according to a Bernstein report this month. About half of IBM’s software revenue comes from workload-based Red Hat and transaction processing.
For the quarter, IBM’s software business could beat revenue expectations, multiple investment firms predicted in reports this month, despite IBM itself previously projecting a deceleration in software growth. Part of the success should come from an early close of IBM’s Confluent acquisition and success in other acquired businesses.
IBM could report 9.9 percent growth year on year in IBM software revenue, Morgan Stanley forecast in a report this month. The investment firm increased that from its previous forecast, which was closer to 8 percent growth year on year. And Morgan Stanley’s forecast is higher than Wall Street’s consensus 8.7 percent expected growth.
The vendor beat software revenue expectations last quarter, with software growing 11 percent year on year compared with the 9 percent Morgan Stanley predicted.
Even if the acquired businesses show healthy numbers for the quarter, Bank of America expects a notable increase in IBM’s organic software revenue from the quarter and expectations for the year, the investment firm said in a report this month. Bank of America put expected growth at 4 percent for the quarter and 6 percent for the fiscal year.
Red Hat and the hybrid cloud business could see 8.9 percent revenue growth year on year, according to Morgan Stanley’s April report.
Red Hat should grow 8 percent year on year in the quarter, according to a Bank of America report this month. That represents flat growth quarter over quarter and comes from weaker consumption and bookings.
Data And Automation: AI Disruption, COBOL Modernization
IBM executives on Wednesday’s call might need to reassure investors about the long-term durability of its data and automation business, which Morgan Stanley characterized as one of the most likely to see disruption from AI tools on the market.
One of the risks to IBM is the ability of AI tools to modernize workloads running on decades-old COBOL—although Krishna has celebrated AI’s potential for COBOL modernization in the past, even touting Watsonx Code Assistant for Z’s ability to refactor COBOL into Java without moving the code and helping developers understand code running on the platform to help extend mainframes for the AI era.
For the latest quarter, IBM’s automation business could see 21.1 percent revenue growth year on year, according to Morgan Stanley’s report. That should include about $135 million from IBM’s HashiCorp division.
In Bank of America’s own report this month, the investment firm put automation growth for the quarter at 13 percent year over year. The firm predicts automation to decelerate to about 11 percent the rest of the year, with benefits from HashiCorp baked in.
Looking at IBM’s data business, that part of software could see 15.6 percent growth year on year for the quarter, which includes about $62 million from DataStax and $50 million from Confluent, according to Morgan Stanley.
Bank of America put data growth at 14 percent year on year for the quarter including Confluent, with that growth accelerating to 19 percent the rest of the fiscal year.
Infrastructure Watch: The z17 Cycle, Hardware Prices
Like other hardware vendors facing rising component costs and supply chain shortages, IBM could see revenue from its infrastructure business pull forward from the second half of 2026 to the first as customers make purchases earlier to get ahead of growing costs.
Expecting notable sales pull-through, Morgan Stanley increased IBM’s expected infrastructure revenue for the first half of the year by 4 percent and lowered second-half revenue by 3 percent, keeping 2026’s total basically the same.
Bank of America’s report this month put hybrid infrastructure at 24 percent growth for the quarter thanks to where IBM and its partners are at in the z17 selling cycle. The investment firm expects hybrid and infrastructure support to decline by about 2 percent the rest of the year.
A positive going for IBM’s hardware business is above-average results in Morgan Stanley’s latest quarterly CIO survey compared with other infrastructure vendors. Net IBM spending intentions by CIOs grew 18 points over the third quarter of 2025, for example, with Dell Technologies the best performer in the survey.
IBM net spending intentions improved 19 points over the prior survey, now reflecting 22 percent growth in CIO spending over the next three years. The average hardware net spending intentions grew 6 points from the prior survey in 2025’s third quarter, now reaching 12 percent growth over the next three years.
IBM did see a worse performance when it came to storage, with the company seeing a fewer share of CIOs calling it the best positioned vendor for capturing cloud, flash, hyperconverged and other new areas of growth. IBM’s share dropped from 10 percent of survey participants to 5 percent.
For CIOs using mainframes, half of them are on z16, about a fourth are on z15 and 14 percent have upgraded to the newest z17 model, according to Morgan Stanley’s survey. The rest are on z14 and older. The two main reasons IBM users upgraded to z17 were the lower total cost of ownership compared with older generations and the ability to leverage AI and advanced analytics on z17.
The z17 sales cycle should also help IBM’s transaction processing business, also called TPP, which could grow about 1.4 percent year on year, according to Morgan Stanley. Bank of America also expects low growth for this business from the quarter, with growth accelerating during the year to 4 percent thanks to the z17 selling cycle.
IBM Consulting: Demand Signals, AI Impact
Listeners on Wednesday will likely want to hear IBM executives provide details on whether AI and the economy are helping or hurting IBM Consulting—No. 6 on CRN’s 2025 Solution Provider 500.
IBM Consulting could see 1.7 percent growth year on year for the quarter, higher than expected, Morgan Stanley said in its April report. Fueling the investment firm’s forecast is a 14 percent increase in IBM Consulting job postings quarter on quarter. This part of IBM’s business decelerated in growth last quarter.
Bank of America’s report expects consulting to decline 1 percent in the quarter and grow 1 percent the whole year.
Product Updates: Confluent, Security, Red Hat And Quantum
IBM executives on Wednesday’s call will likely tout product advancements from the quarter while showing early wins from recently acquired companies.
IBM closing more than a quarter early on its purchase of data-streaming vendor Confluent for $11 billion means quicker integration across the companies’ portfolios and quicker cross-selling opportunities for partners. Confluent has more than 6,500 enterprise clients and integration opportunities that include working with IBM Z for driving real-time events at transaction sources and streaming transactional data for real-time analytics and automation.
Confluent can work with IBM MQ and IBM webMethods Hybrid Integration for high-scale event streaming and allowing AI agents to sense and act on business events in real time in another example, according to the vendor.
Even before the close, Confluent was at work advancing its products in multiple areas, recently disclosing that its Cloud for Government fully managed data streaming platform has achieved Federal Risk and Authorization Management Program (FedRAMP) Moderate Authorization and an open preview for Confluent Intelligence capabilities that connect AI agents and uncover more accurate, intelligent data analysis through the Agent2Agent (A2A) protocol.
IBM itself disclosed this month that it reached FedRAMP authorizations with 11 of its AI and automation software products and services, reflecting a unique position to grow the vendor and its ecosystems’ positions in AI for government agencies.
In February, Confluent revealed its new Sell With Confluent reseller program for systems integrators looking to grow their data streaming practices.
In cybersecurity, IBM recently revealed a new assessment plus its multi-agent-powered IBM Autonomous Security service as ways to protect enterprises against agentic attacks.
And although the world is focused on AI opportunities, IBM hasn’t taken its foot off the gas when it comes to the next technological era around the corner, with the vendor unveiling in March the industry’s first published quantum‑centric supercomputing reference architecture.
IBM positions the architecture as a way to integrate quantum computing into modern supercomputing environments, with quantum processing units (QPUs) working alongside GPUs and CPUs across on‑premises systems, research centers and the cloud to tackle scientific challenges no one computing approach can solve.
Innovations from IBM’s Red Hat division during the quarter include a Red Hat Enterprise Linux Extended Life Cycle, Premium, subscription that provides predictable 14-year life cycles for major Red Hat Enterprise Linux releases plus Red Hat AI Enterprise, an integrated AI platform for deploying and managing AI models, agents and applications across hybrid cloud environments.
