International Business Machines (IBM) AI Stock Analysis

• Market Cap: $224.75B
• Dividend Yield: 2.79%
• Average Volume (3M): 5.51M
• Price to Earnings (P/E): 41.6
• Beta (1Y): 0.58
• Revenue Growth: 1.23%
• EPS Growth: -33.87%
• Country: US
• Employees: 270,300
• Sector: Technology
• Sector Strength: 63
• Industry: Information Technology Services
• EPS (TTM): 5.81
• Shares Outstanding: 929,396,550
• 10 Day Avg. Volume: 5,916,722
• 30 Day Avg. Volume: 5,513,530
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.27
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 8.00
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $257.67
• Price Target Upside: 6.55% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 16

IBM's overall stock score of 68 reflects its solid financial performance with stable profitability and strong cash flow management, although high leverage remains a concern. Technical indicators suggest a neutral trend, while the valuation appears slightly high. The optimistic outlook from the earnings call, driven by growth in software and AI initiatives, enhances the positive sentiment despite some challenges.

Positive Factors

Financial Performance

Stronger free cash flow generation for the year could offset software challenges, especially if the USD remains weak.

Product Innovation

IBM announced the z17 with enhanced capabilities in AI acceleration and fraud detection, expected to drive a strong cycle.

Strategic Initiatives

IBM's strategic push into hybrid cloud, artificial intelligence, and machine learning is aimed at capturing growth opportunities in these innovative sectors.

Negative Factors

Economic Risk

Management noted uncertainty and the risk of a global GDP slowdown, which could influence IBM's future performance.

IT Spending Concerns

IBM's consulting segment is exposed to heightened risk due to a deceleration in IT spending, leading to potential challenges in revenue growth.

Software Segment Challenges

Software underperformed for the first time in several quarters, raising concerns about IBM's ability to maintain its premium valuation.

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 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's financial performance shows strong profitability with a gross profit margin of 57.0% and steady revenue growth. However, there are operational challenges, as indicated by the decline in EBIT margin, and high leverage with a debt-to-equity ratio of 2.49 poses a risk. Cash flow metrics are robust, with a healthy operating cash flow to net income ratio of 2.49, and free cash flow growth rate at 4.9%.

Income Statement

IBM demonstrates solid profitability with a TTM gross profit margin of 57.0% and a net profit margin of 8.7%. Revenue growth has been steady, with a 1.7% increase from the previous year. However, EBIT margin has declined from 9.6% to 7.3%, indicating operational challenges.

Balance Sheet

IBM's balance sheet shows a high debt-to-equity ratio of 2.49, which could pose financial risk if not managed properly. However, the company maintains a reasonable equity ratio of 18.4%, and a return on equity of 20.4% is strong, indicating efficient use of equity capital.

Cash Flow

Cash flow metrics are robust, with a healthy operating cash flow to net income ratio of 2.49 and a free cash flow to net income ratio of 2.25. The free cash flow growth rate shows a 4.9% increase, indicating effective cash generation despite capital expenditures.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
62.75B	61.86B	60.53B	57.35B	55.18B
	Gross Profit
35.55B	34.30B	32.69B	31.49B	30.86B
	EBIT
10.07B	0.00	0.00	0.00	0.00
	EBITDA
12.18B	14.69B	7.17B	12.41B	10.55B
	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

• Technical Analysis Sentiment: Positive
• Last Price: 241.82
• 50DMA: Negative
• 100DMA: Positive
• 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 241.82 is above the 20-day moving average (MA) of 236.35, below the 50-day MA of 245.81, and above the 200-day MA of 222.43, indicating a neutral trend. The MACD of -1.63 indicates Negative momentum. The RSI at 51.82 is Neutral, neither overbought nor oversold. The STOCH value of 58.97 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
CTSH	82 Outperform	$36.27B	16.32	16.21%	1.65%	1.98%	7.16%
ACN	77 Outperform	$181.42B	23.91	27.26%	1.86%	4.10%	9.78%
INFY	69 Neutral	$68.09B	21.14	29.00%	2.36%	3.85%	-0.38%
IBM	68 Neutral	$224.75B	41.60	21.91%	2.79%	1.23%	-33.87%
WIT	67 Neutral	$29.86B	19.25	16.91%	2.14%	-2.83%	106.18%
Sector *	59 Neutral	$10.71B	10.35	-6.77%	3.02%	7.32%	-11.27%
FIS	54 Neutral	$38.32B	51.02	4.65%	1.88%	-17.38%	―

International Business Machines Corporate Events

IBM Exceeds Q1 2025 Financial Expectations with Strong Growth

IBM reported strong financial performance for the first quarter of 2025, exceeding expectations with solid revenue growth, profitability, and cash flow generation. The company’s strategy around hybrid cloud and AI continues to drive success, with significant contributions from its software segment, particularly in automation and AI. IBM’s infrastructure segment also showed strong performance, and the company remains optimistic about its future growth prospects, maintaining its full-year guidance for revenue growth and free cash flow.

Spark’s Take on IBM Stock

According to Spark, TipRanks’ AI Analyst, IBM is a Neutral.

IBM’s overall stock score of 68 reflects its solid financial performance with stable profitability and strong cash flow management, although the high leverage remains a concern. Technical indicators suggest a neutral trend, while the valuation appears slightly high. The optimistic outlook from the earnings call, driven by growth in software and AI initiatives, enhances the positive sentiment despite some challenges.

To see Spark’s full report on IBM stock, click here.

IBM Updates Revenue Reporting Categories for 2025

IBM announced changes to its revenue reporting categories within its Software and Consulting segments, effective from the first quarter of 2025. These updates aim to better align with market opportunities and provide more relevant information to investors, without affecting IBM’s consolidated financial statements. The changes involve recasting historical financials for 2023 and 2024 and adjusting revenue categories to reflect the company’s strategic focus on hybrid cloud, automation, data, and transaction processing. This move is intended to enhance transparency and allow investors to update their financial models ahead of the first quarter earnings report in April 2025.

IBM Emphasizes Hybrid Cloud and AI Strategy

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.