IBM’s Nanostack Breakthrough and Analyst Upgrade Create a Two-Pronged Rally — But Earnings Loom

International Business Machines has given investors two very different reasons to cheer in recent weeks. The stock surged 5.1% in heavy trading on Friday after unveiling a “Nanostack” chip architecture that shrinks semiconductor structures to just 0.7 nanometres, a milestone that positions IBM as a potential leader in the next generation of AI hardware. Then, a day earlier — or perhaps on a separate trading day — JPMorgan’s upgrade sent the shares climbing another 4.3% on 23 June. The twin catalysts have lifted IBM 8.5% over the past seven sessions, with the stock now changing hands at €240.50.

The Nanostack achievement is undeniably impressive, but it comes with a five-year horizon to commercialisation. IBM is still searching for a manufacturing partner and wrestling with technical hurdles like thermal noise and complex integration. Analysts applaud the innovation as proof of the company’s R&D muscle, yet they warn that near-term profit impacts are negligible. The real operational momentum, they argue, lies elsewhere.

That momentum is firmly rooted in software. Software revenue reached $7.1 billion in the first quarter of fiscal 2026, growing 11%, while consulting managed just 4% growth to $5.3 billion. Infrastructure was the fastest segment at 15%. JPMorgan analyst Brian Essex, who upgraded IBM from Neutral to Overweight on 23 June and raised his price target from $270 to $291, underscored that software generates roughly two-thirds of the company’s profit despite contributing only about 45% of total sales. That profit mix, he argued, justifies a higher valuation.

Should investors sell immediately? Or is it worth buying IBM?

The upgrade came as a corrective to a midsummer selloff sparked by Accenture’s gloomy annual forecast. Accenture’s shares collapsed more than 17% after its warning, and contagion swept through the IT sector, dragging IBM down with it. But the panic overlooked a crucial distinction: Accenture is a pure consulting play, while IBM derives less than a third of its revenue from consulting. The spillover was not entirely unfounded, however — 80% of IBM’s $12.5 billion AI backlog sits in the consulting division, so any weakness there does threaten the AI growth narrative.

Morgan Stanley followed JPMorgan’s lead, lifting its price target from $225 to $267 while keeping an Equal-Weight rating. Meanwhile, the company itself has confirmed full-year constant-currency revenue growth above 5%, with software expected to expand at least 10%. AI-related software revenue has already surpassed $1.5 billion, growing more than 40%. A quarterly dividend increase to $1.69 per share — the 31st consecutive annual hike — adds to the shareholder appeal.

Technically, the recovery is sharp. IBM now trades roughly 10% above its 50-day moving average, though it still sits about 18% below its 52-week high of €292.85. The immediate test comes on 22 July, when IBM reports second-quarter results. That report will reveal whether the consulting headwinds were a temporary noise or a signal of more persistent trouble. CEO Arvind Krishna is also expected to provide an update on the quantum computing roadmap, a topic that has increasingly captured investor attention. Meanwhile, the Nanostack chip, while years from the factory floor, reinforces the company’s long-term ambition to command the enterprise-AI infrastructure stack — a story that will take patience to play out.