Shares of tech company International Business Machines (IBM) surged in after-hours trading after it reported earnings for its fourth quarter of Fiscal Year 2025. Earnings per share came in at $4.52, which beat analysts’ consensus estimate of $4.31 per share. In addition, sales increased by 12.2% year-over-year, with revenue hitting $19.69 billion. This also beat estimates of $19.21 billion.
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When breaking down the numbers further, Software, Infrastructure, and Consulting revenues increased by 14%, 21%, and 3%, respectively. However, the company’s overall growth was primarily driven by the Software segment, as it is IBM’s largest segment, as shown in the image below.
IBM also generated $4 billion in net cash from operating activities, which was a $300 million decrease compared to the same period last year. However, free cash flow rose by $1.4 billion year-over-year to reach $7.6 billion. Moreover, IBM returned $1.6 billion to shareholders through dividends.
IBM’s Guidance for 2026
Looking forward, management has provided the following guidance for 2026:
- Revenue growth rate of at least 5% on a constant currency basis, versus analysts’ estimates of 4.6%
- Free cash flow to increase by more than $1 billion year-over-year
As we can see, the company’s outlook is better than expected, which also helped the stock jump in after-hours trading.
Is IBM a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on IBM stock based on 11 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average IBM price target of $321.27 per share implies 8.7% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
