IBM has outperformed Microsoft in the past year under new CEO, potential better buy short-term.

From Nasdaq: 2024-09-07 04:35:00

Over the last decade, IBM stock rose 10% while Microsoft stock surged 810%, due to IBM’s missed shift to cloud services, revenue struggles, and focus on cost-cutting over investing in growth. IBM’s move to stabilize growth under new CEO Arvind Krishna has helped the stock outperform Microsoft in the past 12 months.

IBM under Krishna has stabilized revenue and earnings growth by trimming non-core businesses, spinning off some divisions, expanding Red Hat, and developing cross-compatible AI services. Analysts expect IBM’s revenue to grow at a CAGR of 4% from 2023 to 2026, showing signs of a turnaround.

Microsoft, under CEO Satya Nadella, saw its revenue grow rapidly as it expanded its cloud, mobile, and AI ecosystems, turning the company into a high-growth tech giant again. Analysts expect Microsoft’s revenue and EPS to rise at a CAGR of 14% and 15%, respectively, from fiscal 2024 to fiscal 2027.

While Microsoft remains a solid long-term investment, IBM could outperform it in the next 12 months due to potential investor interest in dividend stocks like IBM and a slowdown in Microsoft’s Azure sales growth. Until Microsoft’s valuations cool off, IBM may be the better buy for now.



Read more at Nasdaq: Better Cloud and AI Stock: IBM vs. Microsoft