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International Business Machines (IBM)
NYSE:IBM
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International Business Machines
(NYSE:IBM)67Neutral
Positive Factors
Cost Efficiencies
Cost efficiencies and PTI margin expansion targets are ahead of expectations.
Software Growth
Revenue growth is expected to be led by Software with growth of around 10%, indicating a strong emphasis on expanding this segment.
Negative Factors
Execution Challenges
Near-flawless execution is needed to meet multi-year targets at a premium valuation.
International Business Machines (IBM) vs. S&P 500 (SPY)
Market Cap
$234.79B
Dividend Yield2.67%
Average Volume (3M)5.23M
Price to Earnings (P/E)39.4
Beta (1Y)0.65
Revenue Growth1.45%
EPS Growth-20.56%
CountryUS
Employees305,300
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)6.42
Shares Outstanding927,264,340
10 Day Avg. Volume4,808,458
30 Day Avg. Volume5,234,632
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.70
Price to Cash Flow (P/CF)13.40
P/FCF Ratio12.30
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$260.00Price Target Upside2.68% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
International Business Machines Business Overview & Revenue Model
Company DescriptionFounded in 1911, New York-based International Business Machines Corp. is an information technology and consulting company, which provides integrated solutions and services worldwide. It operates through the following segments: Cloud & Cognitive Software, Global Business Services, Global Technology Services, Systems, and Global Financing.
How the Company Makes MoneyIBM generates revenue through multiple streams, primarily focusing on its hybrid cloud and artificial intelligence segments. The company offers cloud services, including infrastructure as a service (IaaS) and platform as a service (PaaS), which are pivotal to its growth strategy. Additionally, IBM earns from software sales, including middleware and operating systems, and provides extensive consulting and IT services to help clients with digital transformation. Hardware sales, particularly mainframes and servers, also contribute to its earnings. Significant partnerships with large enterprises and governments enhance its service reach and revenue potential. Furthermore, IBM's strategic investments in research and development foster innovation, enabling the creation of new products and services that drive future revenue.
International Business Machines Financial Statement Overview
Summary
IBM demonstrates solid financial performance with stable profitability and effective cash flow management. However, the high leverage reflected in the balance sheet may pose risks. The company shows a moderate growth trajectory in revenues, complemented by strong ROE and cash flow ratios, but should be cautious of its relatively low equity ratio.Income Statement
IBM's TTM (Trailing-Twelve-Months) financials show a moderate gross profit margin of 56.33% and a net profit margin of 9.60%, indicating stable profitability. The revenue growth rate is 1.44% compared to the previous annual period, suggesting modest sales growth. EBIT and EBITDA margins are healthy at 14.09% and 16.27%, respectively, reflecting efficient cost management.70
Positive
Balance Sheet
IBM's debt-to-equity ratio is high at 2.14, indicating significant leverage. The return on equity is strong at 22.06%, showing effective use of equity to generate profits. However, the equity ratio of 19.91% points to a relatively low equity base compared to total assets, which could pose risks during economic downturns.65
Positive
Cash Flow
The free cash flow growth rate is minimal at 0.79% compared to the previous year, but the operating cash flow to net income ratio of 2.23 indicates strong cash generation relative to net earnings. Additionally, the free cash flow to net income ratio stands at 2.03, highlighting robust cash flow conversion.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 62.75B | 61.86B | 60.53B | 57.35B | 73.62B | Gross Profit |
| 35.55B | 34.30B | 32.69B | 31.49B | 35.58B | EBIT |
| 6.01B | 0.00 | 2.37B | 5.99B | 5.92B | EBITDA |
| 12.18B | 14.69B | 6.85B | 12.00B | 11.36B | Net Income Common Stockholders |
| 6.02B | 7.50B | 1.64B | 5.74B | 5.59B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 14.59B | 13.44B | 8.74B | 7.25B | 13.81B | Total Assets |
| 137.18B | 135.24B | 127.24B | 132.00B | 155.97B | Total Debt |
| 58.40B | 59.94B | 54.01B | 55.14B | 66.47B | Net Debt |
| 44.45B | 46.87B | 46.13B | 48.49B | 53.26B | Total Liabilities |
| 109.78B | 112.63B | 105.22B | 113.00B | 135.25B | Stockholders Equity |
| 27.31B | 22.53B | 21.94B | 18.90B | 20.60B |
| Cash Flow | Free Cash Flow | |||
| 11.76B | 12.12B | 8.57B | 10.41B | 15.15B | Operating Cash Flow |
| 13.45B | 13.93B | 10.44B | 12.80B | 18.20B | Investing Cash Flow |
| -4.94B | -7.07B | -4.20B | -5.97B | -3.03B | Financing Cash Flow |
| -7.08B | -1.77B | -4.96B | -13.35B | -9.72B |
International Business Machines Technical Analysis
Positive
253.21
Price Trends
237.76
Positive
229.08
Positive
207.39
Positive
Market Momentum
4.23
Positive
53.92
Neutral
29.15
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IBM, the sentiment is Positive. The current price of 253.21 is below the 20-day moving average (MA) of 257.25, above the 50-day MA of 237.76, and above the 200-day MA of 207.39, indicating a neutral trend. The MACD of 4.23 indicates Positive momentum. The RSI at 53.92 is Neutral, neither overbought nor oversold. The STOCH value of 29.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for IBM.
International Business Machines Risk Analysis
International Business Machines disclosed 25 risk factors in its most recent earnings report. International Business Machines reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
International Business Machines Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
81 Outperform | $2.89T | 31.30 | 30.64% | 0.81% | 15.04% | 12.38% | |
75 Outperform | $440.44B | 38.54 | 84.57% | 0.99% | 6.40% | 12.83% | |
74 Outperform | $251.67B | 27.72 | 20.18% | 2.52% | -5.34% | -30.57% | |
72 Outperform | $24.74B | 9.86 | 10.29% | 2.73% | 3.30% | 25.00% | |
67 Neutral | $234.79B | 39.40 | 22.06% | 2.67% | 1.45% | -20.56% | |
66 Neutral | $66.01B | 14.74 | -179.12% | 1.86% | 7.99% | ― | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% |
* Technology Sector Average
Performance Comparison
IBM
International Business Machines
253.21
67.51
36.35%
CSCO
Cisco Systems
63.26
15.81
33.32%
MSFT
Microsoft
388.61
-10.99
-2.75%
ORCL
Oracle
157.47
47.72
43.48%
HPE
Hewlett Packard Enterprise
18.84
1.22
6.92%
DELL
Dell Technologies
94.07
-21.94
-18.91%
International Business Machines Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: 11.49% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call reflected strong performance in software and free cash flow, driven by successful initiatives in AI and mainframe programs. However, there were challenges in consulting and infrastructure segments, along with broader macroeconomic concerns. The overall sentiment is optimistic with a positive outlook for 2025.Highlights
Strong Revenue Growth and Cash Flow
IBM delivered revenue growth of 3% and $12.7 billion of free cash flow in 2024, marking the highest level of cash flow generation in many years. Software grew by 9% in 2024, surpassing the mid-single-digit target.
Record Performance in Software and Red Hat
Software saw an 11% revenue growth in the fourth quarter with Red Hat growing 17%. IBM's AI book of business reached over $5 billion, with significant contributions from Software and Consulting.
Successful Mainframe Program
IBM's z16 mainframe program was the most successful in history, with a 122% program-to-program growth and a 30% increase in installed MIPS.
Strong Free Cash Flow and Financial Flexibility
IBM generated $12.7 billion of free cash flow for the full year, marking a 14% growth. The company ended the year with $14.8 billion in cash, enhancing their financial flexibility.
Positive Outlook for 2025
IBM expects revenue growth to increase to 5% plus in 2025, with about $13.5 billion in free cash flow. Software revenue is expected to grow approaching double-digits.
Lowlights
Challenges in Consulting Revenue
Consulting revenue declined by 1% in 2024 due to a dynamic market environment and clients reprioritizing spending. Consulting's growth was below the model for 2024.
Infrastructure Revenue Decline
Infrastructure revenue decreased by 6% in the fourth quarter, with IBM Z revenue down by 20% due to product cycle dynamics.
Continued Macroeconomic Headwinds
Geopolitical tensions, interest-rate volatility, and supply-chain vulnerabilities were cited as ongoing macroeconomic headwinds affecting the business landscape.
Company Guidance
During IBM's fourth quarter 2024 earnings call, the company highlighted its strong financial performance and provided detailed guidance for 2025. IBM reported a revenue growth of 3% for 2024 and generated $12.7 billion in free cash flow, marking its highest level in many years. The software segment saw a 9% growth, led by Red Hat with a 17% increase in the fourth quarter. Looking ahead to 2025, IBM expects revenue growth to exceed 5%, driven by a mix of software and infrastructure growth, with free cash flow projected at approximately $13.5 billion. The company anticipates software revenue to approach double-digit growth, consulting to achieve low-single-digit growth, and infrastructure to contribute about a point to overall revenue growth. IBM's technology initiatives, such as advancements in generative AI and strategic partnerships, are expected to bolster future performance.International Business Machines Corporate Events
Business Operations and StrategyFinancial Disclosures
IBM Emphasizes Hybrid Cloud and AI Strategy
Positive
Feb 4, 2025
On February 4, 2025, IBM’s Investor Day highlighted its strategic focus on hybrid cloud and AI technologies. The company reported achieving its 2024 financial targets, including revenue growth and the highest free cash flow margin in its history. IBM’s strategy involves leveraging its extensive partner network and investing in innovation to drive sustainable growth. The company’s performance metrics and non-GAAP financial disclosures aim to provide investors with a clear understanding of its financial health and operational efficiency.
Business Operations and StrategyFinancial Disclosures
IBM Reports Q4 2024 Growth and AI Leadership
Positive
Jan 30, 2025
In its fourth-quarter 2024 earnings presentation on January 29, 2025, IBM reported a revenue growth of 3% and $12.7 billion in free cash flow. The company highlighted significant achievements with its Software segment growing 9%, and Red Hat achieving double-digit growth. Despite some challenges in Consulting, IBM expressed confidence in future growth driven by technology momentum and strategic partnerships. The company also emphasized its leadership in generative AI, with a growing book of business and a focus on AI-driven business transformations. Looking ahead, IBM anticipates revenue growth of over 5% in 2025, supported by its enhanced portfolio and culture of innovation.
Business Operations and Strategy
IBM Sets Investor Day for February 2025
Neutral
Dec 9, 2024
IBM has announced that it will host an Investor Day on February 4, 2025, in New York City, also offering a live webcast for remote participants. The event, featuring Chairman and CEO Arvind Krishna and other senior leaders, will focus on the company’s strategy and key initiatives. This is a significant opportunity for investors to gain insights into IBM’s future direction.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.