logo
Pay Close Attention to This Crucial Revenue Source for Artificial Intelligence (AI) Giant IBM

Pay Close Attention to This Crucial Revenue Source for Artificial Intelligence (AI) Giant IBM

Yahoo07-04-2025

When most investors think of artificial intelligence stocks, Nvidia is a top-of-mind name. And rightfully so. Its hardware is at the heart of most AI data centers. Or maybe it's Microsoft or Alphabet's, both of which offer popular AI-powered virtual assistants free of charge.
IBM (NYSE: IBM), on the other hand, doesn't come up much during discussions of artificial intelligence's likely future. However, maybe it should. Smart investors would at least put the company on their AI radars anyway. Here's why.
To be clear, IBM doesn't hold a candle to Nvidia's share of the AI data center market. As noted by the Motley Fool's own in-house research team, Nvidia generated more than $35 billion worth of AI data center revenue for the final quarter of last year, while Intel, Advanced Micro Devices, and IBM each only reported on the order of $4 billion. Nvidia is also the only one of these hardware makers to see any meaningful net growth of their AI data center business over the course of the past several years.
Still, IBM is a budding artificial intelligence name worth watching. But first things first. IBM's single-biggest profit center these days isn't hardware. It's software, which accounts for more than 40% of its revenue and nearly two-thirds of the company's total gross profits. These numbers, however, come with an important footnote.
See, it's hardware sales that ultimately generate software and consulting revenue. As the company has regularly pointed out for some time now, for every $1 spent on its cloud hardware -- which makes up most of what the company categorizes as "infrastructure" -- an additional $3 to $5 is spent on software while another $6 to $8 is shelled out on services.
IBM even picks up an extra dollar or two on additional purchases of enterprise infrastructure. IBM's historical numbers bear this idea out, too.
Connect the dots. Artificial intelligence data centers will never be IBM's biggest business. However, if that business grows, then the rest of IBM will grow even more -- and there's plenty of reason to believe such growth is in the cards.
There's no denying that it hasn't happened yet. The company's enterprise infrastructure business is arguably stagnant, in fact, mostly weighed down by weak sales of its Z series of mainframes and its state-of-the-art Z16 model, in particular.
Although far from being the kind of mainframe computer system most people think of when the label became fairly common back in the 1970s through the 1980s, it's still a legacy concept that's distinctly different from most other AI data centers that largely utilize Nvidia's hardware or power apps like Microsoft's AI tool, which is called Copilot.
As time marches on, though, the best solutions always move into the mainstream. As it turns out, IBM's Z16, as well as its upcoming Z17 platform, are outstanding at a type of machine learning called inference. That won't mean much to many people, but it does matter. To date, most of the commonly used AI tools like Google's Gemini and OpenAI's ChatGPT utilize what's called a "training" approach.
That just means these platforms parse a massive amount of selected text-based information on a topic and then come up with an appropriate response to a query based on the sum total of all this aggregated information. It works fine for most purposes.
Inference, on the other hand, is a different approach to machine learning. With inference models, a platform considers all known information but is tasked with taking a new action or making a reasoned but unproven prediction based on this known data. As IBM explains it, "inference is an AI model's moment of truth," ultimately ending in "a test of how well it can apply information learned during training to make a prediction or solve a task."
It's a small, nuanced difference, but it's also a pretty big deal to the artificial intelligence industry. Now that AI platforms effectively know what they don't know but also know they might be asked to craft an appropriate response or solution, artificial intelligence itself is quietly entering a new era. That's why industry research outfit Market.us believes the worldwide AI inference server market is set to grow at an annualized pace of more than 18% through 2034, matching up with a similar outlook from Lucintel.
This prospective growth, of course, bodes very well for IBM, which specializes in the very kings of mainframe servers that are on the cusp of significant demand growth.
IBM isn't the only name that is making artificial intelligence platforms capable of handling heavy-duty inference tasks, for the record. Most any company in the AI hardware business is able to optimize their tech for this relatively newer approach to machine learning.
IBM is arguably one of the better inference plays, though, if not the best. The Telum II processors and their on-chip Spyre accelerators, capable of handling 24 TOPS (tera operations per second), will be found inside Z17 servers. They are the end result of a long string of successful inference-friendly technological developments that aren't quite being matched by other names in the AI hardware business. Data center operators just need to recognize their value. Then, investors need to follow suit.
It's still arguably a bet worth making sooner rather than later, though, before anyone else realizes there's an impending shift ahead for how many of the artificial intelligence industry's platforms process data and respond to users' requests. Just a little more AI server revenue could generate considerably more high-margin software revenue for IBM. Most of this new revenue would also be recurring.
Before you buy stock in International Business Machines, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and International Business Machines wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $461,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $578,035!*
Now, it's worth noting Stock Advisor's total average return is 730% — a market-crushing outperformance compared to 147% for the S&P 500. Don't miss out on the latest top 10 list, available when you join .
See the 10 stocks »
*Stock Advisor returns as of April 5, 2025
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Intel, International Business Machines, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
Pay Close Attention to This Crucial Revenue Source for Artificial Intelligence (AI) Giant IBM was originally published by The Motley Fool

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Stock futures are near flat as U.S.-China trade talks continue, May inflation report looms: Live updates
Stock futures are near flat as U.S.-China trade talks continue, May inflation report looms: Live updates

CNBC

time22 minutes ago

  • CNBC

Stock futures are near flat as U.S.-China trade talks continue, May inflation report looms: Live updates

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2025. Brendan Mcdermid | Reuters Stock futures were little changed on Tuesday evening as investors awaited progress on trade policy talks between the U.S. and China. They also anticipated the release of May's consumer inflation report. Futures tied to the S&P 500 slipped 0.07%, while Nasdaq 100 futures pulled back 0.05%. Dow Jones Industrial Average futures lost 28 points, or 0.07%. Trade talks between U.S. and Beijing officials continued for a second day in London on Tuesday. U.S. Treasury Secretary Scott Bessent said he would be departing the ongoing trade talks with China, but U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer would remain to continue the negotiations. Discussions could extend into Wednesday if needed, Lutnick said earlier. The discussions are a key focus for investors and a broader market that remains jittery toward any jolts on trade policy. Both China and the U.S. previously agreed to temporarily pause high tariffs on one another in May, although a fully ironed out agreement has yet to materialize. In regular trading on Tuesday, the S&P 500 rose about 0.6%, posting a third straight positive session. The broad market index sits less than 2% off the high it notched in February. The Nasdaq Composite added 0.6% on Tuesday, while the 30-stock Dow climbed 0.3%. Even as stocks have been resurging, tariff fears and rising bond yields could hang over the market, according to Deutsche Bank. "One key concern is that the Trump administration, buoyed by the market rebound, may resume aggressive tariff rhetoric—potentially triggering renewed retaliation from China and Europe, as seen earlier this year," the firm's group chief economist David Folkerts-Landau said in a Tuesday note. "At the same time, rising long-end bond yields are amplifying fiscal concerns globally, particularly given plans for expanded deficits across multiple major economies," he added. "With several countries already on unsustainable debt paths, the events of 2025 may have accelerated an inevitable reckoning." Investors will get further insight into the U.S. economy on Wednesday morning as the Bureau of Labor Statistics rolls out May's reading of the consumer price index. Economists polled by Dow Jones call for a 0.2% month-over-month increase, while headline CPI is anticipated to have grown 2.4% from 12 months earlier. A hot report could spook investors who are already on edge over inflationary pressures. "Ultimately this report is not expected to cause any significant changes to the Fed's current wait and see approach when it comes to setting rates," said Sam Millette, director of fixed income at Commonwealth Financial Network. "With that being said, we'll have to wait and see if the report shows the anticipated modest rise in price pressure that's expected or if there are any surprises in store for investors." On the earnings front Wednesday, traders will look for reports from Chewy and Oracle .

Byline Bancorp, Inc. Announces Commencement of Secondary Public Offering of Common Stock and Concurrent Share Repurchase
Byline Bancorp, Inc. Announces Commencement of Secondary Public Offering of Common Stock and Concurrent Share Repurchase

Yahoo

time27 minutes ago

  • Yahoo

Byline Bancorp, Inc. Announces Commencement of Secondary Public Offering of Common Stock and Concurrent Share Repurchase

CHICAGO, June 10, 2025--(BUSINESS WIRE)--Byline Bancorp, Inc. ("Byline" or the "Company") (NYSE: BY) announced today that the Estate of Daniel L. Goodwin (the "Estate") and Equity Shares Investors, LLC, an affiliate of the Estate, the selling stockholders of the Company (the "Selling Stockholders"), are offering for sale to the public a total of 4,282,210 shares (the "Offered Shares") of the Company's common stock (the "Secondary Offering"). The Company is not offering or selling any shares of its common stock in the Secondary Offering and will not receive any proceeds from the sale of its shares of common stock in the Secondary Offering. In addition, the Company intends to purchase from the underwriter between $5 million and $10 million of the shares of common stock in the Secondary Offering (the "Share Repurchase"), at a price per share equal to the price per share to be paid by the underwriter to the Selling Stockholders. The Company intends to execute the Share Repurchase as part of its existing share repurchase program authorized on January 1, 2025. The underwriter will not receive any discount or commission in respect of the shares of common stock being purchased by the Company in the Share Repurchase. The Share Repurchase is conditioned upon the completion of the Secondary Offering, as well as the satisfaction of customary closing conditions, and is expected to close concurrently with the completion of the Secondary Offering. Certain of the Company's directors have indicated an interest in purchasing up to an aggregate $3.1 million in shares of common stock in the Secondary Offering at the public offering price and on the same terms as the other purchasers in the Secondary Offering. J.P. Morgan is serving as the sole underwriter for the Secondary Offering. An automatically effective shelf registration statement on Form S-3 relating to the shares of the Company's common stock subject to the Secondary Offering has been filed with the U.S. Securities and Exchange Commission (the "SEC") and is available on the SEC's website at The Secondary Offering will be made only by means of a prospectus supplement and accompanying prospectus that forms a part of the registration statement, copies of which may be obtained, when available, by request from: J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, by email at prospectus-eq_fi@ and postsalemanualrequests@ This press release does not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act of 1933, as amended. About Byline Bancorp, Inc. Headquartered in Chicago, Byline Bancorp, Inc. is the parent company of Byline Bank, a full service commercial bank serving small- and medium-sized businesses, financial sponsors, and consumers. Byline Bank has approximately $9.6 billion in assets and operates 46 branch locations throughout the Chicago and Milwaukee metropolitan areas. Byline Bank offers a broad range of commercial and community banking products and services including small ticket equipment leasing solutions and is one of the top Small Business Administration lenders in the United States. Forward-Looking Statements This press release may contain "forward-looking statements" including statements concerning the size and terms of the Secondary Offering and the size and terms of the Share Repurchase. All statements other than statements of historical facts contained in this press release may be forward-looking statements. In some cases, you can identify the forward-looking statements by the use of words such as "may," "could," "should," "would," "expect," "plan," "anticipate," "intend," "forecast," "believe," "estimate," "predict," "propose," "potential," "continue," "scheduled," or the negative of these terms or other comparable terminology. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include but are not limited to those set forth in the periodic reports Byline files with the SEC and those described in the registration statement and the prospectus supplement and accompanying prospectus related to the Secondary Offering. All forward-looking statements included in this press release are made only as of the date of this press release. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement. We expressly disclaim any obligation to update or revise any forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise. We make no prediction or statement about the performance of our common stock. View source version on Contacts Contact For Byline Bancorp, Inc.: Investors / Media: Brooks O. RennieHead of Investor RelationsByline Bank(312) 660-5805brennie@

Philochem AG Announces the Licensing of Worldwide Rights to OncoACP3, a novel Radiopharmaceutical Therapeutic and Diagnostic Agent targeting Prostate Cancer, to RayzeBio, a Bristol-Myers Squibb Company, for a potential value of up to $1.35bn plus royalties
Philochem AG Announces the Licensing of Worldwide Rights to OncoACP3, a novel Radiopharmaceutical Therapeutic and Diagnostic Agent targeting Prostate Cancer, to RayzeBio, a Bristol-Myers Squibb Company, for a potential value of up to $1.35bn plus royalties

Yahoo

time32 minutes ago

  • Yahoo

Philochem AG Announces the Licensing of Worldwide Rights to OncoACP3, a novel Radiopharmaceutical Therapeutic and Diagnostic Agent targeting Prostate Cancer, to RayzeBio, a Bristol-Myers Squibb Company, for a potential value of up to $1.35bn plus royalties

Consideration composed of a $350m up-front payment and up to $1.0bn in development, regulatory and commercial milestones, along with mid-single to low double-digit royalties on Global Net Sales OTELFINGEN, Switzerland, June 10, 2025 (GLOBE NEWSWIRE) -- Philochem AG ("Philochem'), a wholly-owned subsidiary of the Philogen Group (MIL:PHIL), and RayzeBio, Inc. ('RayzeBio'), a wholly-owned subsidiary of Bristol-Myers Squibb company (NYSE: BMY), today announced a definitive agreement under which Philochem will license the exclusive worldwide rights to develop, manufacture, and commercialise OncoACP3, a clinical stage therapeutic and diagnostic agent targeting prostate cancer, to RayzeBio. OncoACP3 is a small molecule ligand with high affinity and specificity for Acid Phosphatase 3 (ACP3), a novel target in prostate cancer. The compound is currently under evaluation in a company-sponsored Phase I trial (NCT06840535). Initial data from the first cohort of patients evaluated with the OncoACP3 diagnostic has been promising, displaying selective tumour uptake and long residence time with minimal healthy tissue uptake. IND-enabling activities to support the application for a Phase I therapeutic study with 225Ac-OncoACP3 are ongoing. Prof. Dr. Dario Neri, CEO and CSO of Philogen, commented: 'We are delighted to enter into this new collaboration with RayzeBio, a leader in the field of radiopharmaceutical medicines. This partnership will focus on the development and commercialization of OncoACP3 for both diagnostic and therapeutic applications in prostate cancer. OncoACP3 is a best-in-class targeting agent with the potential to become a breakthrough treatment in this field. This collaboration reflects our shared commitment to translating scientific innovation into meaningful clinical solutions, making OncoACP3 therapies widely available to patients in need.' Ben Hickey, President, RayzeBio commented: 'This collaboration with Philochem enhances our leadership in the rapidly advancing radiopharmaceuticals space, consistent with our strategy to bring forward best-in-class RPT candidates. OncoACP3, with its initial encouraging safety profile, provides a differentiated entry for Bristol Myers Squibb and RayzeBio into the prostate cancer arena, building on our leadership in actinium-based RPT development. This agreement is a significant milestone for RayzeBio and our goal to deliver radiopharmaceuticals to patients.' Under the terms of the agreement, Philochem will receive an up-front payment of $350m and up to $1.0bn in development, regulatory and commercial milestones. The company will also receive mid-single to low double-digit royalties payable on Global Net Sales of both Therapeutic and Diagnostic agents of OncoACP3. The closing of the transaction is subject to regulatory approvals and other customary closing conditions. The parties expect that the agreement will close in the third quarter of 2025. For Philochem, Centerview Partners UK LLP is acting as exclusive financial advisor and Cooley LLP is acting as exclusive legal counsel. About Philogen group Philogen is an Italian-Swiss group active in the biotechnology sector, specialised in the research and development of pharmaceutical products for the treatment of highly lethal diseases. Philogen's mission is to discover, develop and market innovative pharmaceuticals for the treatment of diseases of high unmet need. This is achieved by exploiting (i) proprietary technologies for the isolation of ligands that react with antigens present in certain diseases, (ii) experience in the development of products targeted at the tissues affected by the disease, (iii) experience in drug manufacturing and development, and (iv) an extensive portfolio of patents and intellectual property rights. Although the Group's drugs are primarily oncology applications, the targeting approach is also potentially applicable to other diseases, such as certain chronic inflammatory diseases. FOR MORE INFORMATION Philogen - Investor Relations IR@ - Emanuele Puca | Investor RelationsError in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store