International Business Machines (IBM) AI Stock Analysis

• Market Cap: $249.89B
• Dividend Yield: 2.49%
• Average Volume (3M): 3.45M
• Price to Earnings (P/E): 46.2
• Beta (1Y): 0.63
• Revenue Growth: 1.23%
• EPS Growth: -33.87%
• Country: US
• Employees: 270,300
• Sector: Technology
• Sector Strength: 84
• Industry: Information Technology Services
• EPS (TTM): 1.60
• Shares Outstanding: 929,396,550
• 10 Day Avg. Volume: 3,063,736
• 30 Day Avg. Volume: 3,448,584
• PEG Ratio: -4.94
• Price to Book (P/B): 9.39
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 21.18
• Enterprise Value/Market Cap: 1.24
• Enterprise Value/Revenue: 1.23
• Enterprise Value/Gross Profit: 8.61
• Enterprise Value/Ebitda: 5.90
• 1Y Price Target: $262.15
• Price Target Upside: -3.65% Downside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 15

• Rating: 76 Outperform
• Price Target: $303.00 ▲(11.36%Upside)

IBM's strong financial performance and strategic focus on AI and hybrid cloud drive a solid outlook. Technical indicators show bullish momentum, though valuation metrics suggest the stock is expensive. The earnings call underscores IBM's ability to navigate challenges and achieve growth, enhancing its investment appeal despite high leverage.

Positive Factors

Cost Efficiency

IBM illustrates AI value as its own 'Client Zero'. IBM has cited $3.5bn in cost savings by implementing AI internally.

Product Innovation

IBM's ELA strategy for transaction processing software has been pivotal in driving both adoption and financial stability.

Revenue Growth

IBM is expected to deliver accelerating revenue growth and margin expansion, contributing to a stronger financial performance.

Negative Factors

Growth Skepticism

There is skepticism about IBM's potential for durable organic growth.

Macro Environment

Consulting revenues are expected to remain flat due to the macroeconomic environment and potential discretionary spending reductions by enterprises.

Software Performance

Software underperformed for the first time in several quarters, raising the stakes for IBM to accelerate growth amidst an uncertain macro backdrop.

International Business Machines Business Overview & Revenue Model

Company Description

International Business Machines Corporation (IBM) is a global technology and consulting company headquartered in Armonk, New York. Founded in 1911, IBM operates in multiple sectors, including cloud computing, artificial intelligence, computer hardware, and software. The company provides integrated solutions and services to businesses, governments, and organizations worldwide, focusing on hybrid cloud, data analytics, and enterprise IT infrastructure.

How the Company Makes Money

IBM makes money through several key revenue streams, primarily stemming from its hybrid cloud and AI solutions, software, and consulting services. The hybrid cloud and cognitive software segment, which includes IBM's cloud platform and data analytics, represents a significant portion of its revenue as businesses increasingly migrate to cloud environments. Additionally, IBM's consulting division offers digital transformation and technology consulting services, helping clients implement and manage complex IT systems. The company also generates income from its infrastructure segment, which includes the sale of server hardware and operating systems, as well as through its financing arm, offering leasing and loan services for its products. Strategic partnerships with other technology companies and continued investment in research and development further bolster IBM's revenue streams, enabling the company to innovate and maintain its competitive edge in the technology sector.

International Business Machines Financial Statement Overview

Summary

IBM demonstrates strong profitability with a TTM gross profit margin of 57.0% and a net profit margin of 8.7%. Revenue growth is steady at 1.7%, but EBIT margin has declined, indicating operational challenges. The high debt-to-equity ratio of 2.49 poses a financial risk, though cash flow metrics are robust with a healthy operating cash flow to net income ratio of 2.49.

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
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
62.83B	62.75B	61.86B	60.53B	57.35B	55.18B
	Gross Profit
35.84B	35.55B	34.30B	32.69B	31.49B	30.86B
	EBIT
10.28B	10.07B	9.82B	8.17B	6.87B	4.66B
	EBITDA
12.33B	12.18B	14.69B	7.17B	12.41B	10.55B
	Net Income Common Stockholders
5.47B	6.02B	7.50B	1.64B	5.74B	5.59B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
8.87B	14.59B	13.44B	8.74B	7.25B	13.81B
	Total Assets
152.19B	137.18B	135.24B	127.24B	132.00B	155.97B
	Total Debt
68.16B	58.40B	59.94B	54.01B	55.14B	65.09B
	Net Debt
59.99B	44.45B	46.87B	46.13B	48.49B	51.90B
	Total Liabilities
131.20B	109.78B	112.63B	105.22B	113.00B	135.25B
	Stockholders Equity
20.84B	27.31B	22.53B	21.94B	18.90B	20.60B
Cash Flow		Free Cash Flow
11.94B	11.76B	12.12B	8.46B	10.03B	14.97B
	Operating Cash Flow
13.65B	13.45B	13.93B	10.44B	12.80B	18.20B
	Investing Cash Flow
-13.71B	-4.94B	-7.07B	-4.20B	-5.97B	-3.03B
	Financing Cash Flow
-3.51B	-7.08B	-1.77B	-4.96B	-13.35B	-9.72B

International Business Machines Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 272.08
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 272.08 is above the 20-day moving average (MA) of 263.02, above the 50-day MA of 248.49, and above the 200-day MA of 231.07, indicating a bullish trend. The MACD of 5.31 indicates Negative momentum. The RSI at 68.32 is Neutral, neither overbought nor oversold. The STOCH value of 92.14 is Negative, 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	80 Outperform	$75.74B	23.86	29.00%	2.37%	3.85%	-0.38%
ACN	80 Outperform	$198.86B	26.21	27.26%	1.80%	4.10%	9.78%
CTSH	76 Outperform	$39.57B	16.90	16.61%	1.52%	4.09%	14.05%
IBM	76 Outperform	$249.89B	46.25	21.91%	2.49%	1.23%	-33.87%
FIS	71 Outperform	$42.68B	50.81	5.25%	1.82%	-9.12%	―
WIT	67 Neutral	$30.35B	19.45	16.62%	2.13%	-2.83%	106.18%
Sector *	62 Neutral	$11.80B	10.31	-7.45%	2.91%	7.43%	-7.78%

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.

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.