International Business Machines (IBM) is expected to deliver largely in-line Q1 earnings and Q2 guidance, with no change to full-year targets, Morgan Stanley said Tuesday in a research note.

Despite an elevated valuation, the brokerage said the company is likely to retain its safe-haven status.

Morgan Stanley is forecasting Q1 revenue of $14.4 billion and earnings per share of $1.41, both in line with consensus. The estimate reflects stronger software revenue offset by weaker consulting and infrastructure expectations.

Morgan Stanley's AlphaWise Software Tracker suggests IBM's organic software revenue could grow about 8% year-over-year in constant currency in Q1, roughly 100 basis points higher than previously expected.

The firm lowered its Q1 infrastructure revenue forecast, now modeling 7% year-over-year growth in constant currency, citing the end of the mainframe cycle. It also reduced its Q1 consulting revenue projection, pointing to softer demand, weaker job postings, and recent government contract cuts.

While slightly higher interest expense is expected to weigh on full-year earnings, analysts said they believe IBM's steady performance, portfolio shift toward recurring software and services, and acquisitions including Software AG and HashiCorp should reaccelerate growth in 2026.

Morgan Stanley has an equal-weight rating on the stock, with a target price of $237.

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