Education
About Us
Working with TipRanks
Follow Us
International Business Machines (IBM)
NYSE:IBM
Top Page
International Business Machines
(NYSE:IBM)
Select Model
Select Model
Rating:70Outperform
Price Target:
$261.00
â–²(9.88% Upside)
Action:ReiteratedDate:01/29/26
IBM scores well on operating execution and forward outlook (strong 2026 guidance, software/ARR momentum, and higher expected free cash flow), supported by solid profitability and cash generation. The score is held back by elevated leverage, a high P/E valuation, and currently weak-to-neutral technical momentum (negative MACD and trading below key short-term moving averages).
Positive Factors
Software / ARR momentum
Large, growing ARR (~$23.6B) and software now ~45% of revenue create durable recurring revenue and higher-margin sales. This scale improves revenue visibility, supports cross-sell of AI and data offerings, and underpins sustainable software-led growth and margin expansion over coming quarters.
Strong cash generation and FCF alignment
Robust operating and free cash flow (TTM ~$13.2B) that tracks net income closely provides durable funding for R&D, productivity programs, M&A, debt service and shareholder returns. Reliable FCF strengthens financial flexibility to execute strategy and absorb near-term headwinds.
Mainframe (IBM Z) and hybrid infrastructure moat
Renewed IBM Z momentum and superior AI inferencing capacity create a differentiated, sticky offering for large enterprises. Long replacement cycles and mission-critical workloads give durable pricing power and recurring services demand, supporting hybrid infrastructure leadership.
Negative Factors
Elevated leverage
High absolute debt and a debt-to-equity ratio near 2.4 constrain financial flexibility and increase interest cost sensitivity. Even with strong cash generation, materially de-risking the balance sheet will take time and limits room for large acquisitions or aggressive buybacks if cash flow weakens.
Red Hat deceleration and federal booking delays
Slower Red Hat growth and delayed federal bookings reduce cloud and subscription momentum that is central to IBM’s transformation. Prolonged weakness in signings or federal procurement cycles could slow ARR growth and consulting bookings across multiple quarters, impairing revenue visibility.
Memory pricing & product-cycle volatility
Persistent memory and component price swings can compress infrastructure margins and delay customer refresh cycles for servers. Given IBM’s exposure to infrastructure and Linux server markets, prolonged supply/pricing volatility could reduce revenue predictability and margin stability over the medium term.
International Business Machines (IBM) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$214.35B
Dividend Yield2.21%
Average Volume (3M)6.13M
Price to Earnings (P/E)20.5
Beta (1Y)0.72
Revenue Growth4.51%
EPS Growth21.89%
CountryUS
Employees270,300
SectorTechnology
Sector Strength88
IndustryInformation Technology Services
Share Statistics
EPS (TTM)4.52
Shares Outstanding938,034,400
10 Day Avg. Volume7,847,515
30 Day Avg. Volume6,128,373
Financial Highlights & Ratios
PEG Ratio0.35
Price to Book (P/B)8.46
Price to Sales (P/S)4.09
P/FCF Ratio23.86
Enterprise Value/Market Cap1.29
Enterprise Value/Revenue4.08
Enterprise Value/Gross Profit6.94
Enterprise Value/Ebitda15.94
Forecast
1Y Price Target
$334.18Price Target Upside40.68% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering18
EPS Forecast (FY)12.39
Revenue Forecast (FY)$71.11B
International Business Machines Business Overview & Revenue Model
Company DescriptionInternational 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 MoneyIBM generates revenue through multiple streams, primarily consisting of cloud services, software, and consulting services. The company's cloud computing segment, which includes IBM Cloud and Red Hat, has become a significant source of revenue as businesses increasingly shift to cloud-based solutions. Additionally, IBM's software offerings, particularly in analytics, security, and AI, contribute a substantial portion of its earnings. Consulting services, which encompass IT strategy, implementation, and managed services, also play a crucial role in IBM's revenue model. The company has formed strategic partnerships with organizations such as Salesforce and SAP to enhance its service offerings and expand its market reach. Moreover, IBM invests in research and development to drive innovation, which further strengthens its competitive edge and revenue potential.
International Business Machines Key Performance Indicators (KPIs)
Any
Revenue by Segment
Breaks down IBM’s sales across its various divisions, showcasing which segments are growing and contributing most to overall revenue.
Breaks down IBM’s sales across its various divisions, showcasing which segments are growing and contributing most to overall revenue.
Data provided by:
The Fly
The FlyInternational Business Machines Earnings Call Summary
Earnings Call Date:Jan 28, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 22, 2026
Earnings Call Sentiment Positive
The call highlights strong execution and momentum across IBM’s software-led transformation with multiple record metrics (notably revenue growth, software acceleration, margin expansion, and free cash flow). Significant progress in GenAI, IBM Z, ARR growth, productivity savings, and disciplined M&A amplify the positive outlook and underpin confident 2026 guidance. Notable near-term challenges include Red Hat deceleration, federal booking delays, product-cycle impacts in infrastructure, and expected short-term dilution from Confluent along with memory pricing/headwinds. Overall, the positive operating and financial momentum materially outweighs the manageable near-term headwinds.Q4-2025 Updates
Positive Updates
Strong Full-Year Revenue and Cash Generation
Revenue grew 6% in 2025 (highest level in many years) and IBM generated $14.7 billion of free cash flow (highest in over a decade), representing 16% year-over-year free cash flow growth and the highest free cash flow margin in reported history.
Margin and Profitability Expansion
Operating pretax margin expanded ~100 basis points for the year, adjusted EBITDA grew 17% YoY, operating gross profit margin expanded 170 bps, adjusted EBITDA margin expanded 230 bps, and operating pretax margin expanded 100 bps — reflecting significant margin expansion across the business.
Software-Led Momentum
Software represented ~45% of revenue, grew 9% for the year (highest annual growth in company history) and accelerated to 11% in Q4; ARR was strong at $23.6 billion (up >$2 billion YoY) with organic growth accelerating to over 7% and three of four software sub-segments delivering double-digit growth.
Data and Automation Outperformance
In Q4, Data grew 19% and Automation grew 14%, driven by GenAI demand, platform traction, and strong bookings (including record bookings for HashiCorp).
Mainframe (IBM Z) Strength
IBM Z had an outstanding year with Z17 driving momentum: infrastructure revenue grew 17% in Q4, hybrid infrastructure up 24%, IBM Z revenue up 61% year-over-year in Q4 and Z achieved its highest annual revenue in ~20 years; Z17 processes ~50% more AI inferencing operations per day than Z16.
GenAI Adoption and Book of Business
Cumulative GenAI book of business exceeded $12.5 billion (software >$2B, consulting >$10.5B) with the largest quarterly increase to date; consulting GenAI bookings grew meaningfully and consulting GenAI backlog penetration is >25%.
Productivity Gains and Capital Allocation
IBM exited 2025 with $4.5 billion of annual run-rate productivity savings (well ahead of earlier $2B goal), expects incremental $1B savings in 2026 to reach $5.5B run-rate, and continues disciplined M&A (HashiCorp accretive to EBITDA earlier than expected) while returning capital (returned $6.3B to shareholders).
Guidance and Forward Outlook
Management guides to sustaining 5%+ revenue growth in 2026, expects software to grow ~10% in 2026, operating pretax margin to expand ~1 point, and free cash flow to increase by about $1 billion (to ~$15.7B).
Innovation & Strategic Tech Progress
Progress in quantum (deployed first 120-qubit Nighthawk system for clients), Project Bob reported ~45% developer productivity gains among 20,000+ IBM users, and new partnerships (AMD, Anthropic, AWS, Microsoft, OpenAI, Oracle, NVIDIA & Red Hat) support hybrid AI strategy.
Negative Updates
Red Hat Deceleration and Federal Deal Delay Impact
Red Hat growth decelerated to 8% in Q4 (partly due to wrap of last year's elevated consumption-based services and delays in U.S. federal bookings related to the government shutdown), with Red Hat Linux at mid-single-digit growth versus prior higher expectations.
Consulting Signings and Modest Revenue Growth
Consulting revenue grew only 1% in Q4 and overall signings were down vs. the prior year's record levels; ACV bookings were single-digit in Q4 impacted by federal delays, creating near-term softness in signings despite a healthy backlog ($32B).
Near-Term Dilution from Confluent and Prior M&A
IBM expects approximately $600 million of dilution from the Confluent acquisition in 2026 (driven largely by stock-based compensation and interest expense) and had absorbed >$300 million of dilution from HashiCorp in 2025; Confluent is expected to be accretive to adjusted EBITDA in first full year and free cash flow in year two.
Infrastructure Outlook and Product Cycle Headwinds
Management expects infrastructure revenue to be down low-single-digits in 2026 due to product cycle dynamics (about a half-point impact to IBM), distributed infrastructure was flat and infrastructure support declined 2% in Q4.
Cost and Balance Sheet Pressures
Higher CapEx, cash taxes, and net interest expense are expected to partially offset adjusted EBITDA growth; year-end debt was $61.3 billion (including $15.1B financing business), representing leverage that is being managed but notable in absolute terms.
Memory Pricing and Server Supply Dynamics
Spot DRAM prices and elevated demand for HBM (AI server memory) are driving memory pricing volatility and could pressure server refresh cycles; management expects these dynamics to persist for at least a couple of years and could create headwinds in parts of the infrastructure and Linux server markets.
Company Guidance
IBM guided to sustain 5%+ constant‑currency revenue growth in 2026 with free cash flow up about $1.0 billion to roughly $15.7 billion, driven primarily by high‑single‑digit adjusted EBITDA growth; they expect software to accelerate to ~10% growth (ARR about $23.6B, organic >7%), consulting to grow low‑ to mid‑single digits (backlog ~$32B, GenAI backlog penetration >25%, consulting GenAI book >$2B this quarter), and infrastructure to be down low‑single digits (≈‑0.5 point impact to IBM) despite continued Z momentum. Management expects operating pretax margin expansion of ~100 basis points for the year (Q1 ~100 bps), an operating tax rate in the mid‑teens, and noted ~ $600M of 2026 dilution from the announced Confluent deal (Confluent accretive to adjusted EBITDA in year one and to free cash flow in year two, with ~$500M run‑rate operational synergies by 2027). They also cited productivity targets—exiting 2025 at $4.5B annual run‑rate savings and targeting $5.5B by 2026 (including an incremental $1B this year)—and reaffirmed near‑term cadence: Q1 revenue growth similar to the full year and continued margin/profitability tailwinds.International Business Machines Financial Statement Overview
Summary
Strong profitability recovery and healthy margins (TTM gross margin ~58%, net margin ~12.1%) supported by solid cash generation (TTM OCF/FCF ~$13.2B; FCF-to-net-income ~0.97). The main constraint is elevated leverage (debt-to-equity ~2.39; total debt ~64.6B vs equity ~32.6B), which reduces flexibility despite strong ROE.Income Statement
IBM shows steady top-line momentum, with revenue up ~3.3% in TTM (Trailing-Twelve-Months) versus low-single-digit growth in recent annual periods. Profitability is solid and improving: TTM gross margin is ~58% and net margin is ~12.1%, a meaningful recovery from the weak 2022 net margin (~2.7%). EBIT and EBITDA margins in TTM (~17.4% and ~24.8%) indicate healthy operating leverage, although profitability has been somewhat uneven year-to-year (notably the 2022 dip).78
Positive
Balance Sheet
The balance sheet is workable but leverage remains the key constraint. TTM total debt (~$64.6B) is high relative to equity (~$32.6B), with debt-to-equity at ~2.39 (still elevated despite improvement versus some prior years). Returns on equity are strong in TTM (~28.9%), but that strength is amplified by leverage, which increases financial risk and reduces flexibility if operating conditions weaken.60
Neutral
Cash Flow
Cash generation is a clear support for the story: TTM operating cash flow and free cash flow are both about ~$13.2B, and free cash flow is closely aligned with net income (TTM free cash flow to net income ~0.97), suggesting earnings quality is solid. Free cash flow growth is positive in TTM (~1.18%), though recent annual results show some volatility (including a modest decline in 2024). Cash flow covers a meaningful portion of the debt load (TTM operating cash flow to total debt ~0.38), but leverage still limits how quickly the balance sheet can de-risk.74
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 67.53B | 62.75B | 61.86B | 60.53B | 57.35B |
| Gross Profit | 40.19B | 35.55B | 34.30B | 32.69B | 31.49B |
| EBITDA | 17.28B | 12.18B | 14.69B | 7.17B | 12.41B |
| Net Income | 10.59B | 6.02B | 7.50B | 1.64B | 5.74B |
Balance Sheet | |||||
| Total Assets | 151.88B | 137.18B | 135.24B | 127.24B | 132.00B |
| Cash, Cash Equivalents and Short-Term Investments | 14.47B | 14.59B | 13.44B | 8.74B | 7.25B |
| Total Debt | 67.15B | 58.40B | 59.94B | 54.01B | 55.14B |
| Total Liabilities | 119.14B | 109.78B | 112.63B | 105.22B | 113.00B |
| Stockholders Equity | 32.65B | 27.31B | 22.53B | 21.94B | 18.90B |
Cash Flow | |||||
| Free Cash Flow | 11.57B | 11.76B | 12.12B | 8.46B | 10.03B |
| Operating Cash Flow | 13.19B | 13.45B | 13.93B | 10.44B | 12.80B |
| Investing Cash Flow | -10.30B | -4.94B | -7.07B | -4.20B | -5.97B |
| Financing Cash Flow | -3.83B | -7.08B | -1.77B | -4.96B | -13.35B |
International Business Machines Technical Analysis
Negative
237.54
Price Trends
289.38
Negative
292.76
Negative
277.06
Negative
Market Momentum
-16.11
Positive
32.82
Neutral
16.16
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IBM, the sentiment is Negative. The current price of 237.54 is below the 20-day moving average (MA) of 274.37, below the 50-day MA of 289.38, and below the 200-day MA of 277.06, indicating a bearish trend. The MACD of -16.11 indicates Positive momentum. The RSI at 32.82 is Neutral, neither overbought nor oversold. The STOCH value of 16.16 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $56.96B | 17.83 | 32.85% | 2.58% | 4.62% | 1.06% | |
77 Outperform | $121.05B | 16.26 | 25.35% | 2.25% | 6.58% | 1.19% | |
70 Outperform | $214.35B | 20.54 | 35.26% | 2.21% | 4.51% | 21.89% | |
68 Neutral | $29.20B | 13.39 | 15.16% | 1.46% | 7.44% | -4.57% | |
66 Neutral | $23.08B | 14.71 | 15.82% | 2.78% | -1.97% | 48.61% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% |
* Technology Sector Average
IBM
International Business Machines
237.54
-9.55
-3.86%
ACN
Accenture
191.50
-157.52
-45.13%
CTSH
Cognizant
61.33
-21.19
-25.68%
INFY
Infosys
14.24
-5.76
-28.79%
WIT
Wipro
2.20
-1.03
-31.80%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.