IBM Expands AI Consulting Capabilities: Will it Drive Growth?

Core Insights - IBM has expanded its collaboration with Microsoft to enhance its consulting capabilities through the integration of Microsoft's Copilot with IBM Consulting Advantage, allowing consultants to utilize AI tools within Microsoft 365 applications [1][9] - The AI consulting services market is projected to grow at a compound annual growth rate of 26.2% from 2025 to 2035, positioning IBM to capitalize on this trend with its integrated offerings [4] - IBM's Consulting segment reported revenues of $5.32 billion in Q3, an increase from $5.15 billion year-over-year, driven by business application transformation and modernization [5][9] Company Developments - IBM's integration of AI tools has resulted in the equivalent of over 250,000 hours saved annually, translating to approximately $35 million in value, allowing consultants to focus on revenue-generating tasks [3][9] - The company is currently trading at a price/earnings ratio of 24.19, which is above the industry average of 23.39, indicating a relatively higher valuation [10] Competitive Landscape - IBM faces competition from Accenture and Infosys in the consulting sector, both of which are also expanding their AI capabilities and forming strategic collaborations to enhance their service offerings [6][7] - Accenture has recently partnered with Microsoft to launch a copilot business transformation practice, while Infosys is expanding its generative AI portfolio through collaborations with industry leaders [6][7]