The aggressive target, set by IBM executives at the company's annual investor meeting in New York on Thursday, is the latest step for the technology giant towards emerging, high-margin businesses and away from its previous strongholds in hardware and servers.
The $40 billion will come from areas which IBM calls its "strategic imperatives", namely cloud, analytics, mobile, social and security software. That would represent about 44 percent of the $90 billion in total revenues that Wall Street expects from IBM in 2018.
Those businesses generated $25 billion in revenue for IBM last year, or about 27 percent of its total $93 billion in sales.
The company said it would shift $4 billion in spending to its "strategic imperatives" this year.
IBM has been gradually shrinking its revenue over the past three years, as it sells unprofitable units such as low-end servers, semiconductors and cash registers.
IBM Chief Executive Virginia Rometty has said she is happy to jettison revenue from unprofitable businesses, what she has called "empty calories". IBM revenue has now fallen for the last 11 quarters, while earnings growth has been sporadic.
IBM says its long-term plan is to hit "low single-digit" revenue growth and "high single-digit" growth in operating earnings per share. Last year IBM withdrew its long-term plan to hit $20 per share in operating earnings for 2015.
© Thomson Reuters 2015