IBM CEO makes bold call on quantum computing

IBM CEO Arvind Krishna is doubling down on quantum as IBM’s next big bet.In an April 17 interview with Semafor, Krishna said the technology may not be far off. “Quantum is probably 3 to 5 years away in terms of timing,” he said, adding it “is going to solve the kinds of problems AI could not do.”“AI is great at predicting a bit of the future…Quantum computes the future. So that unlocks problems you can’t even imagine doing with AI,” Krishna said.IBM has been investing in quantum for years, and Krishna recently pointed to concrete progress during its Q1 earnings call.“We continue to make progress in quantum and remain on track to deliver the first large-scale fault-tolerant quantum computer by 2029,” he said.Krishna pointed to recent research milestones, noting that in March, IBM used its quantum hardware with the Cleveland Clinic to simulate a 300-atom system, which shows potential for drug discovery. Another team successfully modeled magnetic materials, which are key to energy and electrification.Krishna said these early results matter because they show practical use cases emerging. “These are significant demonstrations to date that quantum computers can serve as reliable tools for scientific discovery.” Shares of IBM are down 21% year to date.Getty Images IBM is also working on how quantum systems will fit into the broader computing infrastructure. “We also released a new blueprint for quantum-centric supercomputing that outlines the architecture for integrating quantum and classical systems at scale,” he said.The company expects more near-term breakthroughs as well. “We strongly believe that our partners will achieve the first examples of quantum advantage this year, leveraging IBM hardware,” Krishna said.IBM stock drops after earningsIBM stock has dropped about 9% over the past week after reporting its Q1 earnings last Wednesday.The firm posted adjusted earnings of $1.91 per share (up 19% year-over-year) on revenue of $15.92 billion (up 9%), both ahead of Wall Street estimates of $1.81 and $15.62 billion, respectively, CNBC reported.IBM kept its full-year 2026 outlook unchanged, calling for more than 5% revenue growth and a $1 billion increase in free cash flow.Related: IBM CEO sends blunt message on AI and quantum computingIBM CFO Jim Kavanaugh defended the company’s outlook, saying “it is prudent to maintain our guidance.”“I don’t think we’ve ever raised guidance in a first quarter,” Kavanaugh told analysts on the earnings call."The numbers speak for themselves in the first quarter, the strongest first quarter revenue growth that we’ve had in over a decade," Kavanaugh added.Shares of the 115-year-old company are down 21% year to date, according to Yahoo Finance data.In late February, the stock fell 13% in a single day after Anthropic said its Claude model can help modernize COBOL code. Investors saw it as a potential threat to IBM’s mainframe and consulting businesses.Analysts upgrade IBM stock on earnings and quantum computingHSBC has upgraded IBM stock to hold from neutral with a price target of $231, up from $218, according to Seeking Alpha. The firm sees improving fundamentals and a more balanced valuation for the stock.The upgrade follows stronger recent earnings results. “Non-GAAP operating margin came at 15.7%, +195bp y-o-y and c85bp above expectations,” analyst Stephen Bersey wrote in a research note.Related: Morgan Stanley has blunt message for stock market investorsHe added that IBM reported about $2.5 billion in adjusted operating profit, roughly 7% above both HSBC’s estimates and Wall Street expectations, while the company has already achieved $4.5 billion in cost savings since 2023 and is targeting another $1 billion in 2026.Bersey also noted that IBM's quantum computing business may give it a first-mover advantage.“Management emphasized that the company remains on track to deliver the first, large-scale fault-tolerant quantum computer by 2029 and IBM’s partners will achieve the first examples of quantum advantage this year, leveraging IBM hardware,” the analyst wrote.Bersey said IBM’s valuation is “becoming reasonable,” pointing to its quantum computing business, which HSNC values at about $35 billion.The analyst added that the segment could be worth closer to $51 billion if priced in line with IBM's "pure play" peers, implying a higher stock target of $248.IBM stock closed at $233.04 on April 28.Related: Bank of America resets Nvidia stock forecast