International Business Machines (IBM) AI Stock Analysis

• Market Cap: $226.82B
• Dividend Yield: 2.74%
• Average Volume (3M): 5.72M
• Price to Earnings (P/E): 39.2
• Beta (1Y): 0.57
• Revenue Growth: 2.69%
• EPS Growth: -31.73%
• Country: US
• Employees: 270,300
• Sector: Technology
• Sector Strength: 84
• Industry: Information Technology Services
• EPS (TTM): 2.80
• Shares Outstanding: 931,519,200
• 10 Day Avg. Volume: 3,465,140
• 30 Day Avg. Volume: 5,720,760
• PEG Ratio: -1.66
• Price to Book (P/B): 7.54
• Price to Sales (P/S): 3.28
• P/FCF Ratio: 17.52
• Enterprise Value/Market Cap: 1.46
• Enterprise Value/Revenue: 5.18
• Enterprise Value/Gross Profit: 9.00
• Enterprise Value/Ebitda: 25.71
• 1Y Price Target: $297.33
• Price Target Upside: 20.29% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 13

• Rating: 72 Outperform
• Price Target: $274.00 ▲(10.85% Upside)

IBM's overall stock score of 72 reflects strong financial performance and positive earnings call outcomes, highlighting growth in key segments like AI and hybrid cloud. However, the high P/E ratio and mixed technical indicators suggest caution. The company's strategic initiatives and raised guidance provide optimism, but investors should be mindful of valuation concerns and leverage risks.

Positive Factors

AI and Infrastructure

The introduction of Spyre cards (AI acceleration) is expected to enhance Transaction Processing strength in the coming years.

Free Cash Flow

IBM is shifting towards higher margin Software over time, which is driving strong growth in free cash flow.

Generative AI

IBM's Generative AI backlog was strong, up about $1.5 billion quarter over quarter.

Negative Factors

Consulting Challenges

Consulting growth remains challenged with weak discretionary spend, AI cannibalizing traditional projects, and project duration still extended.

Organic Software Revenues

Organic software revenues declined to approximately 3% due to weaker transaction processing and integration distractions in Automation.

Transaction Processing

IBM’s Transaction Processing revenue, which is usually stable, saw a surprising growth deceleration in the latest quarter.

International Business Machines Business Overview & Revenue Model

Company Description

International Business Machines Corporation provides integrated solutions and services worldwide. The company operates through four business segments: Software, Consulting, Infrastructure, and Financing. The Software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solutions; software for business automation, AIOps and management, integration, and application servers; data and artificial intelligence solutions; and security software and services for threat, data, and identity. This segment also provides transaction processing software that supports clients' mission-critical and on-premise workloads in banking, airlines, and retail industries. The Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services; technology consulting services; and application and cloud platform services. The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients' mission-critical and regulated workloads; and support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment. The Financing segment offers lease, installment payment, loan financing, and short-term working capital financing services. The company was formerly known as Computing-Tabulating-Recording Co. International Business Machines Corporation was incorporated in 1911 and is headquartered in Armonk, New York.

How the Company Makes Money

IBM generates revenue through multiple streams, primarily from its cloud and cognitive software, global business services, and systems segments. The company earns a significant portion of its revenue from cloud computing services, which include infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) offerings. Additionally, IBM's consulting services, which encompass business process services and technology consulting, contribute notably to its earnings. The company has established strategic partnerships with various organizations to enhance its product offerings and expand market reach, particularly in industries like healthcare, finance, and government. Moreover, IBM generates income through licensing its software products and providing maintenance and support services. Overall, the combination of these revenue streams, along with ongoing investments in research and development, positions IBM to adapt to market demands and capitalize on emerging technologies.

International Business Machines Financial Statement Overview

Summary

IBM shows strong financial health with stable revenue growth and efficient cash flow generation. Despite high leverage, the company maintains a robust return on equity. Profit margins are solid, though recent pressure on net income needs monitoring. Overall, IBM is well-positioned financially, but should be cautious of its debt levels in fluctuating market environments.

Income Statement

IBM demonstrated a stable revenue growth with a 2.04% increase in TTM compared to 2024. The gross profit margin stands at a solid 57.56% for the TTM, although the net profit margin is moderate at 9.11%. EBIT and EBITDA margins are healthy at 14.56% and 16.33% respectively, indicating strong operational efficiency. However, the decrease in net income and EBIT from 2024 reflects some pressure on profitability.

Balance Sheet

IBM maintains a high debt-to-equity ratio of 2.46, suggesting significant leverage. However, its return on equity (ROE) is strong at 21.20% in the TTM, showing effective use of equity. The equity ratio is relatively low at 18.52%, indicating a reliance on debt financing which poses a risk if market conditions change.

Cash Flow

IBM's cash flow health is impressive with free cash flow to net income ratio at 2.13, showing efficient cash conversion. The operating cash flow to net income ratio is also strong at 2.28, reflecting robust cash generation relative to profits. Free cash flow growth is positive, enhancing IBM's capability to invest in growth or reduce debt.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	64.04B	62.75B	61.86B	60.53B	57.35B	55.18B
Gross Profit	36.87B	35.55B	34.30B	32.69B	31.49B	30.86B
EBITDA	12.90B	12.18B	14.69B	7.17B	12.41B	10.55B
Net Income	5.83B	6.02B	7.50B	1.64B	5.74B	5.59B
Balance Sheet
Total Assets	148.59B	137.18B	135.24B	127.24B	132.00B	155.97B
Cash, Cash Equivalents and Short-Term Investments	15.45B	14.59B	13.44B	8.74B	7.25B	13.81B
Total Debt	67.72B	58.40B	59.94B	54.01B	55.14B	65.09B
Total Liabilities	121.00B	109.78B	112.63B	105.22B	113.00B	135.25B
Stockholders Equity	27.51B	27.31B	22.53B	21.94B	18.90B	20.60B
Cash Flow
Free Cash Flow	11.81B	11.76B	12.12B	8.46B	10.03B	14.97B
Operating Cash Flow	13.28B	13.45B	13.93B	10.44B	12.80B	18.20B
Investing Cash Flow	-14.25B	-4.94B	-7.07B	-4.20B	-5.97B	-3.03B
Financing Cash Flow	-1.85B	-7.08B	-1.77B	-4.96B	-13.35B	-9.72B

International Business Machines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 247.18
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: 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 247.18 is above the 20-day moving average (MA) of 241.62, below the 50-day MA of 261.76, and above the 200-day MA of 246.16, indicating a neutral trend. The MACD of -3.76 indicates Negative momentum. The RSI at 48.99 is Neutral, neither overbought nor oversold. The STOCH value of 66.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for IBM.

International Business Machines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
INFY	75 Outperform	$70.59B	21.84	30.46%	3.05%	4.52%	-0.22%
CTSH	74 Outperform	$35.06B	14.58	16.69%	1.71%	6.34%	12.16%
WIT	73 Outperform	$29.82B	20.78	16.50%	3.03%	-1.95%	35.65%
IBM	72 Outperform	$226.82B	39.17	22.73%	2.74%	2.69%	-31.73%
ACN	70 Outperform	$161.92B	20.39	27.27%	2.34%	6.21%	14.87%
FI	70 Outperform	$74.35B	22.86	12.66%	―	6.73%	3.93%
Sector *	61 Neutral	$35.51B	8.11	-10.49%	1.89%	8.55%	-8.72%

International Business Machines Corporate Events

IBM Exceeds Q2 2025 Expectations with Strong Growth

IBM reported strong financial results for the second quarter of 2025, with revenue, profit, and cash flow exceeding expectations. The company’s performance was driven by growth in its Software and Infrastructure segments, particularly with the introduction of the z17 mainframe and advancements in AI and hybrid cloud solutions. IBM’s strategic focus on AI and hybrid cloud continues to yield positive outcomes, as evidenced by significant growth in its GenAI business and recognition as an Emerging Leader in AI consulting. The company also expanded its partner ecosystem and launched new capabilities in its watsonx portfolio, further solidifying its position in the technology industry.

IBM Amends Credit Agreements for Financial Flexibility

On June 20, 2025, IBM announced amendments to its existing credit agreements, extending the maturity of its $2.5 billion Three-Year Credit Agreement to June 20, 2028, and its $7.5 billion Five-Year Credit Agreement to June 22, 2030. These amendments, involving major financial institutions like JPMorgan Chase Bank, BNP Paribas, Citibank, and Royal Bank of Canada, are expected to provide IBM with enhanced financial flexibility and stability, potentially impacting its operational strategies and market positioning.