IBM (International Business Machines Corporation) has expanded its long-term partnership with Microsoft by creating a new “Microsoft Practice” inside IBM Consulting. This new setup combines the strengths of both companies to build smart, industry-specific solutions for sectors like retail, finance, government, supply chain, and consumer goods.

The dual offering consists of high-end services through an amalgamation of IBM consulting skills with Microsoft’s technologies such as Azure Cloud, Azure OpenAI, Copilot, Fabric and Sentinel. The mission is to enable businesses to grow faster, move seamlessly into the cloud, and make better use of artificial intelligence (AI).

The Microsoft tools will also be added into IBM Consulting’s AI platform called IBM Consulting Advantage, making it easier for clients to adopt the right AI solutions with full enterprise governance.

IBM is Growing Strong in AI and Hybrid Cloud

IBM is seeing solid demand for its hybrid cloud and AI products. This is driving strong performance in its Software and Consulting businesses. Long-term, growth in analytics, cloud computing, and security services is expected to continue.

IBM’s key AI platform, watsonx, is at the center of its AI strategy. It has three main products:

  • watsonx.ai: For generative AI, foundation models, and machine learning
  • watsonx.data: A specialized data store based on open lakehouse architecture
  • watsonx.governance: To build AI workflows with responsibility and transparency

Stock Price Update

IBM’s stock has increased 47% in the past year a strong rise compared to an 8.2% decline in the overall industry. Even though Microsoft and Amazon (AMZN) are expanding their own AI services (like Azure OpenAI and AWS), they haven’t matched IBM’s stock performance. Microsoft’s stock rose 6.2%, and Amazon’s rose 5.6% in the same period.

Challenges IBM Still Faces

Despite the positive AI and cloud momentum, IBM has a few challenges. It’s facing tough competition from Amazon Web Services and Microsoft Azure. Pricing pressure is affecting profit margins, and the shift to a cloud-based model is time-consuming and costly.

To reduce expenses, IBM is planning to cut about 9,000 jobs in the U.S. this year. Many of these roles will move to India as part of a cost-saving “resource action” strategy. While IBM hasn’t given an official number, reports say layoffs have already started in cities like Raleigh, NC, New York City, NY, Dallas, TX, and California. Teams affected include consulting, CSR, cloud infrastructure, sales, and internal systems. The Cloud Classic division will likely see the biggest cuts, while new roles will be created in India in areas like cloud and consulting.

Investor Sentiment and Future Outlook

Analysts are becoming more optimistic about IBM. Over the past 60 days, 2025 earnings estimates rose 1.2% to $10.91, and 2026 estimates went up 0.5% to $11.67 a sign of growing confidence in the stock’s future. Companies that have readied themselves to manage the most sophisticated of multi-cloud strategies will turn to IBM with their other needs: quantum computing and generative AI.

Still, due to high costs and strong competition, IBM isn’t without risk. It currently holds a Zacks Rank #3 (Hold), meaning it’s seen as a stable investment not a must-buy, but not a sell either. For cautious investors, this could be a time to watch closely rather than jump in.