Shares of IBM were down more than 23% when the market opened on Tuesday, raising fresh questions about whether companies are seeing enough near-term returns from artificial intelligence spending.
It is shaping up to be the worst day for IBM in decades, as its second-quarter earnings results showed profit and revenue missed analysts' forecasts.
In a letter to investors on Tuesday, CEO Arvind Krishna said IBM's Z mainframe business — its large enterprise computing systems boasting advanced AI capabilities — lagged behind the company’s outlook. The flagship product is the z17, described as a "transaction processing powerhouse."
"Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter," Krishna wrote. "What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing."
IBM CEO WARNS WASHINGTON MUST FIND ‘GOLDILOCKS’ MIDDLE GROUND ON AI REGULATIONS
IBM CEO Arvind Krishna attends an event in the Rose Garden of the White House in Washington, D.C., on July 6, 2026. (Mandel Ngan/AFP via Getty Images)
The IBM z17 is a mainframe that has been pitched as something that can instantly detect fraud when a customer swipes their credit card.
"Every time you swipe your credit card, check your bank balance, make a stock transaction or use an ATM, that transaction is likely running through an IBM Z. With AI embedded directly on the platform, IBM’s new z17… enables clients to detect fraud in real time without moving their data," according to IBM's website.
Krishna said IBM's shortfall was largely caused by weakness in this software and infrastructure business as clients prioritized spending on hardware to insulate themselves from further price jumps.
The IBM Watson IoT Center is located in the Highlight Towers in Munich, Germany, on May 22, 2026. (Michael Nguyen/NurPhoto via Getty Images)
IBM'S NEW AI TOOL LETS MASTERS FANS SEARCH OVER 50 YEARS OF TOURNAMENT HISTORY
"In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," Krishna wrote.
"This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization," he continued.
IBM posted adjusted earnings of $2.93 per share on $17.2 billion in revenue, missing Wall Street estimates of $3.01 per share and $17.86 billion in revenue, according to CNBC.
In this photo illustration, the IBM logo is seen displayed on a smartphone. (Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
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Maria Bartiromo, host of FOX Business' "Mornings with Maria," pointed out on Tuesday that IBM's slide is having a ripple effect on the tech sector.
"The biggest drag on the Dow Industrials this morning is IBM. This is the worst day so far that we've ever seen for IBM," Bartiromo said. "This unexpected warning this morning sent a shockwave through the tech sector, causing software names to sell off; ServiceNow, Salesforce, Microsoft, all down."
Other tech firms trading lower this morning include Arm Holdings, Oracle, and Apple.
IBM oznámila předběžné výsledky za 2. čtvrtletí: tržby činily 17,2 mld. USD, meziročně vzrostly o 1 %, a zisk na akcii (EPS) činil 2,27 USD, meziročně klesl o 2 %.
This morning we are releasing selected preliminary second-quarter 2026 financial results. We are still working to close our financial reporting for the quarter and our final results could be slightly different.
For the second quarter:
Revenue:
Revenue of $17.2 billion, up 1 percent Software revenue up 5 percent Consulting revenue flat, up 1 percent at constant currency Infrastructure revenue down 7 percent Profit:
Gross Profit Margin: GAAP: 57.7 percent, down 100 basis points; Operating (Non-GAAP): 59.4 percent, down 70 basis points Pre-Tax Income Margin: GAAP: 14.4 percent, down 90 basis points; Operating (Non-GAAP): 19.2 percent, up 30 basis points Cash Flow:
Year to date, net cash from operating activities of $7.8 billion; free cash flow of $4.8 billion EPS:
Diluted Earnings Per Share: GAAP: $2.27, down 2 percent; Operating (Non-GAAP): $2.93, up 5 percent I want to spend some time explaining what we experienced in the quarter that led to the Software and Infrastructure performance shortfall you see above.
When we discussed our expectations with you in April, we noted that we would be wrapping on the launch of z17 in the second quarter. Given this was the strongest start to a mainframe program in our history, we expected Infrastructure revenue to decline low-single digits for the year, beginning this quarter. What played out was worse than our expectations, driven by a shortfall in our Z performance and the associated software stack, primarily in Transaction Processing. In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.
These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall.
These are not excuses, but they are realities. Our job is to help our clients through uncertainty, to find paths forward to grow their businesses no matter what is happening in the external environment.
While our second-quarter results are disappointing, our performance in many areas showed strength, reinforcing the conviction we have in our portfolio and strategy.
Within Software, Red Hat revenue growth accelerated sequentially to 11 percent Recent acquisitions including both HashiCorp and Confluent delivered strong performance With clients prioritizing infrastructure investments, Distributed Infrastructure had its best performance in reported history, up 37 percent with strong growth in Power and Storage, and a backlog of approximately $500 million exiting the quarter Despite challenges this quarter, z17 remains at nearly 130 percent program-to-program, well ahead of z16 which was our strongest program on record, with clients representing 85% of installed MIPs maintaining or growing capacity Continued growth in Consulting signings led by strong GenAI contribution Productivity initiatives contributed to continued operating (non-GAAP) PTI Margin expansion in the quarter Importantly, we continue to innovate at speed and scale. After the introduction of Mythos, our teams across IBM and Red Hat quickly mobilized to take advantage of an unprecedented opportunity, launching Lightwell. Lightwell is a $5 billion commitment backed by new frontier AI capabilities and a global force of more than 20,000 engineers creating a trusted enterprise clearinghouse to address open source software vulnerabilities. Early adopters include organizations like Bank of America, BNY, Citi, Goldman Sachs, JPMorganChase, Mastercard, Morgan Stanley, Royal Bank of Canada, State Street, Visa, Wells Fargo and more. General availability of Lightwell was announced on July 8.
Finally, quantum computing is no longer decades away, it is upon us, and we are investing aggressively. Recently, with the U.S. Department of Commerce, we announced a letter of intent to build Anderon, the world's first pure-play quantum wafer foundry supported by $1 billion in CHIPS incentives provided by the DoC and a $1 billion cash contribution by IBM. Shortly after that, we disclosed plans to invest more than $10 billion in quantum over the next five years, spanning R&D, capex, manufacturing scaling, M&A and ecosystem expansion. We remain on track to deliver the first large-scale fault-tolerant quantum computer by 2029.
While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business. To remedy challenges this quarter, we are undertaking new initiatives and accelerating others, all to improve our results going forward. We will hold our regularly scheduled conference call with you all on July 22, 2026, at 5PM ET to go into deeper detail and discuss our full-year expectations.
Arvind Krishna
Chairman, President and Chief Executive Officer, IBM
(NYSE: IBM)
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this letter may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including, but not limited to, the following: a downturn in economic environment and client spending budgets; a failure of the company's innovation initiatives; damage to the company's reputation; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; the company's ability to successfully manage acquisitions, alliances and divestitures, including integration challenges, failure to achieve objectives, the assumption or retention of liabilities and higher debt levels; fluctuations in financial results; impact of local legal, economic, political, health and other conditions; the company's failure to meet growth and productivity objectives; ineffective internal controls; the company's use of accounting estimates; impairment of the company's goodwill or amortizable intangible assets; the company's ability to attract and retain key employees and its reliance on critical skills; impacts of relationships with critical suppliers; product and service quality issues; the development and use of AI, including the company's increased AI solutions and use of AI technologies; impacts of business with government clients; reliance on third party distribution channels and ecosystems; cybersecurity and data protection considerations; adverse effects related to climate change and other environmental matters; tax matters; legal proceedings and investigatory risks; the company's pension plans; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Qs, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission or in materials incorporated therein by reference.
Any forward-looking statement in this letter speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements.
Presentation of Information in this Letter
In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this letter the following non-GAAP information, which management believes provides useful information to investors:
adjusting for currency (i.e., at constant currency); presenting operating (non-GAAP) earnings per share amounts and related income statement items; free cash flow; net cash from operating activities excluding IBM Financing receivables. The rationale for management's use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this letter and is being submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled for Wednesday, July 22, 2026 at 5:00 p.m. ET. The Webcast may be accessed via a link at https://www.ibm.com/investor/events/earnings-2q26. Presentation charts will be available shortly before the Webcast.
Selected Financial Information Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).
Contact:
IBM
Sarah Meron, 347-891-1770
[email protected]
Tim Davidson, 914-844-7847
[email protected]
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
(Unaudited; $ in millions except per share amounts)
Three Months Ended June 30, 2026
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Operating
(Non-GAAP)
Gross profit
$ 9,907
$ 287
$ —
$ 10,194
Gross profit margin
57.7
%
1.7
pts
—
pts
59.4
%
Pre-tax income from continuing operations
2,479
716
96
3,290
Pre-tax income margin from continuing operations
14.4
%
4.2
pts
0.6
pts
19.2
%
Diluted earnings per share: continuing operations
$ 2.27
$ 0.58
$ 0.08
$ 2.93
Three Months Ended June 30, 2025
Continuing Operations
GAAP
Acquisition-
Related
Adjustments (1)
Retirement-
Related
Adjustments (2)
Operating
(Non-GAAP)
Gross profit
$ 9,977
$ 225
$ —
$ 10,202
Gross profit margin
58.8
%
1.3
pts
—
pts
60.1
%
Pre-tax income from continuing operations
2,597
575
25
3,197
Pre-tax income margin from continuing operations
15.3
%
3.4
pts
0.1
pts
18.8
%
Diluted earnings per share: continuing operations
$ 2.31
$ 0.47
$ 0.02
$ 2.80
(1)
Includes amortization of acquired intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, tax charges related to acquisition integration, and pre-closing charges, such as financing costs.
(2)
Includes amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements and pension insolvency costs and other costs.
INTERNATIONAL BUSINESS MACHINES CORPORATION
GAAP OPERATING CASH FLOW TO FREE CASH FLOW RECONCILIATION
(Unaudited)
($ in millions)
Six Months Ended
June 30, 2026
Net cash provided by operating activities per GAAP
$ 7,766
Less: change in IBM Financing receivables
2,264
Net cash from operating activities excl. IBM Financing receivables
The IBM logo is seen during the Viva Technology conference dedicated to innovation and startups at Porte de Versailles exhibition center in Paris, France, June 12, 2025. REUTERS/Benoit... Purchase Licensing Rights, opens new tab Read more
July 14 (Reuters) - IBM's (IBM.N), opens new tab preliminary second-quarter revenue forecast came below Wall Street estimate on Tuesday, as customers prioritized spending on AI infrastructure, including servers, storage and memory purchases, sending its shares slumping 17% in premarket trading.
The results reflect an industry-wide shift in technology spending toward AI infrastructure, reducing budgets for traditional software.
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According to the preliminary results, the company expects revenue of $17.2 billion during the quarter, compared with analysts' estimate of $17.86 billion, according to data compiled by LSEG.
Adjusted earnings per share is expected to be $2.93, compared with the estimate of $3.02.
IBM CEO Arvind Krishna said in a letter to investors that in this quarter the company "faltered" in adapting quickly enough to the evolving market conditions, leading to "numerous large deals" not closing as expected.
Reporting by Harshita Mary Varghese in Bengaluru; Editing by Shilpi Majumdar
Our Standards: The Thomson Reuters Trust Principles., opens new tab
IBM v 1. čtvrtletí překonala odhady: EPS činil 1,91 USD a tržby 15,917 mld. USD, meziročně +9,5 %. Vedení potvrdilo výhled růstu tržeb v konstantních měnách o více než 5 %.
At $292.59, International Business Machines (NYSE:IBM | IBM Price Prediction) is a Buy, echoing Jim Cramer’s call on Mad Money after a viewer asked for a verdict on the stock. Cramer called IBM inexpensive, praised CEO Arvind Krishna’s execution, and told viewers to buy some now and add on any panic dips.
IBM sits at the intersection of enterprise software, hybrid cloud, and mainframe infrastructure, with 96% of its software portfolio classified as enabling infrastructure, not applications. Big Blue has methodically become an AI infrastructure supplier for global corporations, and Krishna has spent years reshaping the portfolio for this moment. The stock has rebounded from early-year lows but still trails the broader market, which is the setup Cramer is pointing at.
Why the Bulls See a Cheap AI Infrastructure Compounder IBM’s Q1 2026 results strengthen the bull case. Non-GAAP EPS came in at $1.91 versus $1.81 expected, the fourth straight quarterly beat, on revenue of $15.917B, up 9.5% year over year. Software revenue rose 11.3% with Red Hat up 13% and Data up 19%, while IBM Z mainframe revenue surged 51% and infrastructure segment margin expanded from 8.6% to 15.8%.
Krishna is monetizing AI at the silicon layer. A fully populated mainframe can now run “about 450 billion inferences [operations] a day”, letting banks apply fraud models to every transaction instead of a 10% sample. The generative AI book of business finished 2025 above $12.5B inception-to-date. Meanwhile, management maintained guidance for more than 5% constant currency revenue growth and roughly $1 billion of incremental YoY free cash flow in 2026. At a forward P/E of 23, that is a growth business trading like a legacy one.
Why the Bears Say the Rerating Has Already Happened IBM traded as low as $212.34 in the past year and now sits near $292.94 against a 52-week high of $332.46. Consulting, roughly a third of revenue, grew just 1% in constant currency, a soft spot bears argue will worsen as clients redirect budgets toward hyperscaler-native AI stacks.
Leverage is climbing. Total debt sits at $66.4 billion after the acquisition of data-streaming platform Confluent, while cash, restricted cash, and marketable securities fell to $11.8 billion from $14.5 billion. Free cash flow did not crack in Q1. It rose to $2.2 billion, up $0.3 billion year over year, even as IBM absorbed acquisition-related spending. The bear case is balance-sheet pressure, with cash down from year-end and debt elevated after another large software deal. Composite sentiment has slid 16.59 points over seven days, and Reddit discussion has cooled from bullish readings of 65 in late June to a bearish range of 36 to 42 in early July, with one r/stocks thread framing IBM as a “forgotten” tech name.
Why Patience Has a Real Case Too The Wall Street consensus analyst target sits at $294.57, essentially where IBM stock already trades. Q2 results land soon. Polymarket assigns a 90% probability of an earnings beat but only a 48.5% probability of software revenue clearing $8.2B, leaving room for a mixed earnings report that stalls the stock.
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Patient investors can watch three things: software acceleration toward the 10% plus full-year target, whether consulting inflects above 1% constant currency, and Confluent integration progress.
What the Numbers Say About the Setup IBM trades at $292.72 against an average analyst target of $294.57, implied upside of roughly 1.6%, across 23 analysts. The ratings skew bullish: 3 Strong Buy, 12 Buy, 7 Hold, 0 Sell, and 1 Strong Sell.
Valuation is 25 trailing and 23 forward, with a 2.28% dividend yield resting on 31 consecutive years of increases. IBM is down 1.64% year to date and up 2.62% over one year, while the S&P 500 is up 10.71% year to date and 20.63% over one year.
Why the Bull Case Holds at This Price Trading above $290, the bull case leans on three catalysts over the next 12 months. Q2 results later this month are the near-term trigger, with prediction markets pricing a 90% probability of a beat. Behind it sits a software segment that management expects to grow above 10% for the full year, and a mainframe cycle where Z17 hardware placement value ran more than $1 billion ahead of Z16’s first year. Together, those catalysts give IBM two ways to rerate: stronger earnings and a higher multiple.
Buying a business growing revenue 9.5% and free cash flow 13% at a forward multiple of 23 leaves margin for error that hyperscalers do not offer. Krishna is executing on a portfolio he built for this moment, telling analysts “this is a tailwind because of the model that we picked”. The thesis breaks if software growth stalls below 8%, consulting turns negative, or the Confluent integration slips.
Cramer’s framing captures it vividly: this is a high-quality operator being priced like a legacy laggard, and the market has not caught up.
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IBM rozšířila platformu IBM Bob o multiagentní funkce, vestavěnou analytiku nákladů a předpřipravené pracovní postupy pro modernizaci IBM Z, IBM i a Javy. Firma říká, že nové nástroje mají zrychlit vývoj a zpřesnit řízení AI ve velkých podnicích.
Latest IBM Bob Updates Help Enterprises Deliver Production-Ready Software Fast IBM Bob is Built to Optimize the Cost of AI-Driven Development Beyond the Model IBM Bob Now Offers Pre-Built, Customizable Enterprise Workflows for IBM Z, IBM i, Plus Java Modernization , /PRNewswire/ -- Today, IBM (NYSE: IBM) announced major updates to IBM Bob, its agentic software development platform, including new multi-agent capabilities, built-in AI cost and use analytics, and pre-built, specialized workflows for modernizing enterprise systems.
Now that organizations are using AI to write massive amounts of code, their software development challenges have moved to other parts of the process with 85% of DevSecOps professionals surveyed agreeing that AI has shifted the bottleneck from writing code to reviewing and validating it.1 IBM Bob is architected to bring AI capabilities wherever software engineering work happens. Rather than limiting AI to a single development interface for isolated tasks, Bob provides a unified foundation for teams to coordinate across the software development lifecycle.
For example, engineers at Jack Henry, a leading financial services and banking technology provider, were facing challenges maintaining and evolving a large RPG codebase as its application portfolio expanded in size and complexity. "Using IBM Bob," explained Kevin Sligar, Chief Technical Architect at Jack Henry. "Our developers are able to accelerate RPG development workflows, improve code quality, and gain deeper insights into decades of accumulated system knowledge while gaining efficiency in enhancement efforts."
Many enterprise engineers are manually choosing models, trying to balancing cost versus performance, and still ending up with inconsistent outcomes and unpredictable spend. Bob can now optimize across the execution system, not just model selection. Bob matches models to tasks, coordinates AI execution across agents, and provides organizations with visibility into productivity, quality, performance, and cost through the newly launched Bobalytics, to help enterprises optimize AI at scale.
"Bob is the platform enterprise customers have been asking for," said Neel Sundaresan, GM, Automation and AI, IBM. "The bar for enterprise AI is no longer a better coding assistant. It's an end-to-end agentic development partner that works inside any system development teams already use, with the governance, security, and cost controls enterprises require. We built Bob to solve the problems enterprises actually have, and the updates we're announcing today are the foundation for everything that comes next."
Engineering teams also encounter unique challenges as they move beyond code generation and apply AI to larger, more complex work like updating legacy applications or modernizing IBM Z, IBM i, and Java environments.
Blue Pearl, a cloud solutions and consulting services company, has successfully used IBM Bob for this type of complex project. "We introduced IBM Bob to a legacy modernization program, an effort originally projected to take nine months with 14 engineers was completed in just three days," said Saireshan Govender, Group CEO of Blue Pearl. "The most powerful outcome wasn't the speed – it was the combination of operational efficiency, cost optimization, and real-world results we could trust and build on."
AI output can vary depending on how the work is done, which can create significant issues for these types of high-stakes, multi-phase projects. Structured, repeatable workflows help reduce that variability so teams can deliver reliable, auditable results at enterprise scale.
IBM Bob now has pre-built workflows available that teams can customize and extend for their own environments to ensure outcomes are consistent and auditable, regardless of who runs it. IBM Bob Premium Packages for IBM Z, IBM i, and Java Modernization, are each opinionated workflows built on decades of IBM's domain experience that optimize AI for enterprise teams that need to do large-scale modernization.
What's New In IBM Bob:
Built-in usage visibility and cost optimization: Users can now access Bobalytics, a new feature that helps them monitor consumption, allocate resources and maintain oversight so they can scale AI according to their internal mandates. Parallel, model-native tool calling: Bob now allows models to request several tools in one turn and run them together. Subagents manage context at scale: Every exploratory step an AI takes, whether it's file reads, searches, or function traces, can bloat the context window and drive up cost. Now Bob subagents handle complex work in an isolated context, to deliver fast responses while helping manage cost. The latest version of IBM Bob is available for download at bob.ibm.com/download and for more details on the new capabilities and features, visit: https://bob.ibm.com/blog/bob-v2-release-announcement.
Now Available: IBM Bob Premium Packages
IBM has spent decades at the center of enterprise modernization across mainframes, IBM i systems, and Java codebases that global businesses run on. Bob's first three premium packages translate IBM's institutional knowledge into AI-native workflows that are structured, repeatable, auditable and purpose-built for the environments other tools weren't designed to handle.
Premium packages available now include:
IBM Z: Mainframe environments sit at the core of global banking, insurance and commerce, and have historically been the hardest places for AI to help. Bob now addresses this by bringing AI-native application modernization to IBM Z for the first time with COBOL and PL/I modernization and JCL analysis. For more details on Premium Package for IBM Z, visit: https://www.ibm.com/new/announcements/announcing-the-ibm-bob-premium-package-for-z IBM i: IBM i has powered mission-critical operations at enterprises worldwide for decades. Bob is bringing AI-native development to these environments for the first time, with remote file system integration, IBM i-specific modes and tools, and workflows built around the operational patterns of IBM i shops. For more details on Premium Package for IBMI i, visit: https://www.ibm.com/new/announcements/introducing-the-ibm-bob-premium-package-for-i Java Modernization: Enterprise Java portfolios remain some of the largest and most complex modernization challenges in today's software landscape. Bob delivers AI-guided workflows for Java modernization, including migration to Java 25, large-scale refactoring and dependency analysis at scale, in a structured and repeatable manner. For more details on Premium Package for Java Modernization, visit: https://www.ibm.com/new/announcements/announcing-ibm-bob-premium-package-for-java-modernization About IBM
IBM is a leading provider of global hybrid cloud and AI, and consulting expertise. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Thousands of governments and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM's hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM's breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and consulting deliver open and flexible options to our clients. All of this is backed by IBM's long-standing commitment to trust, transparency, responsibility, inclusivity and service. Visit www.ibm.com for more information.
Media contact:
Rebecca Neufeld
IBM
[email protected]
1
GitLab. (2026). The 2026 AI Accountability Report.
Jim Cramer spent his July 6, 2026 Stop Trading segment pointing away from the obvious AI trade. While traders chase every hyperscaler capex beneficiary and GPU adjacency they can find, he told viewers to “check, without the cauldron of the data center, [they] should be looking at IBM.” His pitch leaned on a fresh Bank of America upgrade and a valuation that, in a market where AI names routinely trade north of 40x forward earnings, looks almost quaint.
IBM (NYSE:IBM | IBM Price Prediction) is the trade he wants you to make while the rest of the market is busy elsewhere.
The Cramer pitch, in his own words Cramer’s setup was direct. “Bank of America raising price target, raising earnings per share. It’s got some of course AI. But it really is this great computer company,” he said, before landing on the number that matters. “And it sells at 22 times next year’s earnings. I think this one works.” He also acknowledged the elephant. “I know it got hit very badly when it reported, but I think it’s going to be a good, good idea.”
IBM printed a clean beat on April 22, then sold off anyway. Shares closed the filing day at $257.80, dropped roughly 10% within a week, then clawed back to $299.68 by Monday morning. BofA is now at $330 (raised from $315), citing software strength, Confluent synergies, and IBM’s dividend record. The forward P/E per Alpha Vantage is 23x, close enough to Cramer’s 22 to call it a match.
What’s actually inside the “boring” AI story The AI part of IBM’s business is bigger than casual observers realize. The generative AI book of business had crossed $12.5 billion inception-to-date by year-end, with roughly four-fifths in Consulting and one-fifth in Software, and it has been accelerating from $7.5 billion in Q2 2025 and $9.5 billion in Q3 2025. That is real money attached to real workloads.
Q1 2026 gave the thesis teeth. Revenue of $15.917 billion, up 9.46% year over year, beat by 1.70%. Non-GAAP EPS of $1.91 versus $1.81 consensus made it the fourth consecutive EPS beat. Software grew 11.3% with Red Hat up 13% and Data up 19%. Infrastructure was the shocker. IBM Z mainframe revenue rose 51% year over year and segment margin expanding to 15.8% from 8.6%.
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Arvind Krishna claimed on the call that IBM’s fully populated Z can now handle “about 450 billion inferences a day”, which is why banks are running fraud models directly on the transaction rail instead of shipping data out.
Then there is the ballast. IBM raised the dividend to $1.69 per share, the 31st consecutive annual increase, and the company has paid a quarterly dividend every year since 1916. That income floor does not exist in the data-center-darling universe. You can verify the Q1 numbers in the Q1 2026 8-K exhibit filed with the SEC.
Pressure-testing the 22x trade Is 22x forward earnings actually cheap for what IBM does, or is it priced correctly for a company that grew Consulting only 4% in the quarter and carries elevated debt after Confluent? Free cash flow guidance calls for an approximately $1 billion year-over-year increase in 2026. Return on equity sits at 35.8%. Beta is 0.675, so you are getting AI exposure with less whip than the rest of the complex.
The bearish read has weight. Consulting is the largest slice of that $12.5 billion AI book, and consulting revenue growing 4% while the backlog is 30% GenAI raises a fair question about whether AI is expanding the pie or eating older services. Reddit conversation in June kept surfacing IBM in “forgotten tech stocks” threads, which is either the contrarian’s dream or the market telling you something.
Cramer’s call is coherent. A 2.25% dividend yield, a forward multiple in the low 20s, a real AI book compounding fast, and a mainframe cycle that will not quit. Whether that trade-off works depends on whether you are trying to win the next quarter or the next five years.
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IBM představila nové konfigurace z17 a LinuxONE 5 v rack mount i single frame provedení, aby firmám pomohla lépe využít prostor v datových centrech. Novinky přidávají až 82 jader a 18 TB paměti.
Powerful single frame and rack mount systems and new AI and automation software upgrades for IBM Z and LinuxONE 5 help enterprises deploy workloads with more flexibility
, /PRNewswire/ -- IBM (NYSE: IBM) today announces new IBM z17 and IBM LinuxONE 5 configurations, marking the first time IBM is offering rack mount alongside single frame systems across its full Z and LinuxONE portfolio. The expanded IBM z17 and LinuxONE 5 portfolios now offer a wide range of deployment options, engineered with the same flagship performance, security, and ecosystem standards. New single frame and rack mount options provide additional ways for organizations to position their infrastructure where it fits best for their business needs, helping support flexibility and operational efficiency.
LinuxONE 5 Single Frame System
z17 Single Frame System. Organizations processing highly sensitive workloads at scale are facing record-low data center vacancy and rental rates exceeding $400 per kW/month, according to CBRE's 2026 Global Data Center Trend Report.1 At the same time, they need infrastructure that can optimize their data center footprint while prioritizing the resilience required for their core applications. Enterprises can use IBM z17 and LinuxONE 5 rack mount and single frame systems to address these challenges, optimizing their data center real estate to meet today's realities.
"The number of mission-critical workloads is rising at an incredible pace, forcing organizations to make tough decisions about performance, AI integration, and infrastructure footprint," said Tom McPherson, General Manager, IBM Z and LinuxONE. "With these new IBM Z and IBM LinuxONE systems, we're making it easier to run workloads where they make the most sense, while opening the door for a wider range of organizations to benefit from these technologies for the first time."
New Systems Built for Data Center Flexibility
The new IBM z17 and IBM LinuxONE 5 configurations support up to 82 cores and 18 TB of memory across two processor drawers, representing about a 20% increase in core count and 12% increase in memory capacity. Single processor capacity of IBM z17 ME2 provides full speed IBM z/OS configurations including 10% greater throughput per core than IBM z16 A02 with some variation based on workload and configuration.2
Clients have the flexibility to co-locate IBM and non-IBM equipment to achieve the best fit-for-purpose installation in their data center. Each system is designed to help organizations reclaim space, improve energy efficiency, and integrate seamlessly into existing environments:
IBM z17 single frame is a fully packaged solution in an IBM rack and intelligent power distribution units (iPDUs), delivered as a complete enclosed unit ready to deploy, now with the added flexibility for clients to co-locate other technologies within the frame. IBM z17 rack mount allows clients to install IBM Z components directly into their own industry-standard rack, with built-in flexibility for co-location with other technologies. IBM LinuxONE Rockhopper 5 is the scalable, multi-drawer LinuxONE system for high-density workloads, with on-chip AI acceleration, confidential computing, and post- quantum cryptography available in both single frame and rack mount configurations. IBM LinuxONE Rockhopper 5 rack mount and Express offerings deliver enterprise-grade Linux, confidential computing, and on-chip AI acceleration in a compact 18U configuration. Designed for organizations supporting a smaller set of workloads, the offering provides a cost-efficient entry point that can scale as business grows, while prioritizing security, resiliency, and performance. As with the rest of the IBM z17 and LinuxONE 5 portfolio announced last year, the single frame and rack mount systems deliver advanced multi-model AI inferencing through the IBM Telum® II processor, Red Hat OpenShift AI and the IBM Spyre™ Accelerator to deliver in-transaction predictive AI and generative AI.
Maximizing Business Value at the Core
Building on the flexibility of IBM Z and IBM LinuxONE systems, IBM is announcing new software and management capabilities designed to help clients simplify infrastructure operations, reduce the skills required to run the platform, and get more value from the workloads already running their business.
IBM Infrastructure Management for Z and LinuxONE brings together provisioning, configuration, and operations together. Enterprises can now leverage Terraform and widely adopted Infrastructure-as-Code that are engineered to automate infrastructure deployments, and orchestrate configurations in a unified user interface with a simple visual I/O topology and configuration while addressing the number of specialists required. IBM COBOL Elevate for z/OS is built to simplify modernization and optimize performance for COBOL applications running on IBM z17, helping clients get more value from the applications they depend on with no rewrites or specialized skills required, with availability beginning September 18. Post-quantum cryptography security is now standard on z17 and LinuxONE Rockhopper 5 systems, leveraging post-quantum cryptography, confidential computing, and enterprise-wide secrets management. New IBM Crypto Discovery & Inventory capabilities are engineered to simplify security operations by giving security teams a consolidated view of their cryptographic posture across the enterprise, helping them prepare for post-quantum standards with end-to-end visibility. "With the emergence of generative AI methods, we need the highest levels of performance, efficiency, resiliency and security to safely hold, and process the sensitive datasets," said Dr. Owain Kenway, Head of Research and Development (Platform Technologies) in ARC at University College London. "The new IBM LinuxONE 5 single frame, rack mount, and Express models enable organizations like us to access advanced technologies at cost-effective prices, and help our academic teams deliver outstanding research."
Availability
The new z17 single frame and rack mount configurations, IBM LinuxONE Rockhopper 5, and IBM LinuxONE 5 Express will all be generally available August 12, 2026. IBM Infrastructure Management for IBM Z and IBM LinuxONE will be generally available August 14, 2026. IBM COBOL Elevate for z/OS will be generally available September 18, 2026. For more information, visit https://www.ibm.com/products/z17 and https://www.ibm.com/products/linuxone-5.
Statements regarding IBM's future direction and intent are subject to change or withdrawal without notice, and represent goals and objectives only.
Disclaimer:
CBRE's 2026 Global Data Center Trend Report. Based on internal measurements. Results may vary by customer based on
individual workload, configuration and software levels. Visit LSPR website for more details at: www.ibm.com/support/pages/ibm-z-large-systems-performance-reference About IBM
IBM is a leading provider of global hybrid cloud and AI, and consulting expertise. We help clients in more than 175 countries capitalize on insights from their data, streamline business processes, reduce costs and gain the competitive edge in their industries. Thousands of government and corporate entities in critical infrastructure areas such as financial services, telecommunications and healthcare rely on IBM's hybrid cloud platform and Red Hat OpenShift to affect their digital transformations quickly, efficiently and securely. IBM's breakthrough innovations in AI, quantum computing, industry-specific cloud solutions and consulting deliver open and flexible options to our clients. All of this is backed by IBM's long-standing commitment to trust, transparency, responsibility, inclusivity and service.
Additional Sources
New z17 capabilities blog New LinuxONE capabilities blog Security blog z17 Ecosystem & Skills blog Media contacts:
Marshall Hampson
IBM Infrastructure Communications
[email protected]
Aishwerya Paul
IBM Infrastructure Communications
[email protected]
IBM za tři měsíce vzrostl o 15,4 %, ale zaostal za odvětvím, které vzrostlo o 127,3 %, kvůli obavám, že Anthropic Claude Code může narušit poptávku po modernizaci COBOLu a konzultacích.
Key Takeaways IBM lagged its industry over three months amid concerns tied to AI-led COBOL modernization.Anthropic's Claude Code could pressure IBM's legacy modernization services and consulting demand.Hybrid cloud, watsonx, HashiCorp and rising estimates may support IBM's long-term growth. International Business Machines Corporation (IBM - Free Report) has jumped 15.4% over the past three months, underperforming the industry’s growth of 127.3%, largely due to macroeconomic challenges and a sudden development in the artificial intelligence (AI) domain that threatens its core legacy businesses. The stock has, however, outperformed peers like Microsoft Corporation (MSFT - Free Report) and Amazon.com, Inc. (AMZN - Free Report) . While Microsoft gained 2.9%, Amazon has rallied 15.2% over this period.
Three-Month IBM Stock Price Performance
Image Source: Zacks Investment Research
What Plagues IBM?IBM's recent weakness largely stemmed from AI startup Anthropic's announcement that its Claude Code tool is capable of modernizing legacy COBOL applications — a programming language that underpins a significant portion of IBM's mainframe ecosystem. The tool promises to automate labor-intensive tasks such as code analysis, documentation, refactoring and security assessment, potentially reducing enterprises' reliance on legacy modernization specialists like IBM.
IBM has long been the dominant player in the mainframe market, generating recurring revenues not only from its hardware business but also from consulting and modernization services for mission-critical COBOL-based applications. The complexity of these legacy environments has historically created a strong competitive moat, as enterprises have been reluctant to replace or rewrite COBOL systems due to the high costs, operational risks and limited availability of skilled developers.
However, AI-powered code modernization tools could begin to narrow this advantage. COBOL continues to power critical workloads across financial institutions, airlines, retailers and government agencies worldwide. If Claude Code significantly lowers the cost, time and complexity associated with understanding, refactoring and migrating legacy applications, enterprises may increasingly pursue modernization initiatives with fewer specialized consulting resources.
Such a shift could weigh on IBM's Consulting business by reducing demand for labor-intensive legacy modernization projects and putting pressure on pricing in an area that has historically generated attractive margins. While the long-term impact remains uncertain, Anthropic's announcement has introduced a potential competitive overhang for one of IBM's established revenue streams, prompting investors to reassess the company's AI-era growth prospects.
Competitive Pressures Add to IBM WoesIBM is facing competition from Amazon Web Services and Microsoft Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. Weaknesses in its traditional business and foreign exchange volatility remain significant concerns.
IBM’s frequent acquisitions have also escalated integration risks. Buyouts have negatively impacted the company’s balance sheet, resulting in high levels of goodwill and net intangible assets. Moreover, a highly leveraged balance sheet has been troubling IBM over time.
Image Source: Zacks Investment Research
The TailwindsDespite the setbacks, IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which drive the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long run. A combination of a better business mix, improving operating leverage through productivity gains and increased investment in growth opportunities will likely boost profitability.
With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management, translating into a healthy demand for IBM hybrid cloud solutions.
The buyout of HashiCorp has significantly augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM RedHat’s portfolio, bringing additional functionalities for cloud infrastructure management and bolstering its hybrid multi-cloud approach. IBM’s watsonx platform is likely to be the core technology platform for its AI capabilities. watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive.
Estimate Revision TrendIBM is currently witnessing an uptrend in estimate revisions. Earnings estimates for IBM for 2026 have moved up 4.6% to $12.40 over the past year, while the same for 2027 has increased 7.4% to $13.43. The positive estimate revision portrays bullish sentiments about the stock’s growth potential.
Image Source: Zacks Investment Research
End NoteIBM has invested heavily in its own AI capabilities, including watsonx, and could incorporate generative AI into its consulting workflows to improve efficiency rather than lose relevance. A strong emphasis on quantum computing and hybrid cloud is driving value for customers. With improving earnings estimates, the stock is witnessing a positive investor perception.
However, IBM’s growth is dented by high operating costs and stiff competition that reduce its profitability. The company faces a potent threat from Anthropic and needs to fine-tune its business model to remain competitive. With a Zacks Rank #3 (Hold), IBM appears to be treading a middle-of-the-road path, and new investors may be better off trading with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IBM má podle článku bezpečnou dividendu: volný peněžní tok pokryl výplatu z 54 % a firma zvyšuje dividendu už 31 let. Management navíc čeká v roce 2026 růst tržeb i volného peněžního toku.
IBM (NYSE:IBM | IBM Price Prediction) has quietly become a cash-generating utility for corporate AI orchestration, sitting on a $255.3 billion market cap with a $12.5 billion generative AI book of business. For income investors who dismiss enterprise tech as too volatile for a retirement portfolio, the question is simple. Is the dividend safe?
Dividend Snapshot Metric Value Annual Dividend $6.76 per share Dividend Yield 2.49% Consecutive Years of Increases 31 years Most Recent Increase $1.68 to $1.69 (April 2026) Dividend Aristocrat Yes (not yet a King) Payout Ratios Leave Real Room to Breathe In 2025, IBM paid $6.255 billion in common dividends against $11.575 billion of free cash flow. That is a comfortable FCF payout ratio of 54%. Earnings per share came in at $11.59 against roughly $6.72 in dividends, so about 58% of profits funded the payout.
Metric TTM Value Assessment Earnings Payout Ratio 58% Healthy FCF Payout Ratio 54% Healthy Operating Cash Flow Coverage 2.1x Strong FCF coverage has held between 1.44x and 1.91x for five straight years. That is the kind of consistency a retiree wants.
Debt Is the One Wrinkle Worth Watching Metric Value Assessment Debt-to-Equity 1.87x Moderate Net Debt-to-EBITDA 2.8x Manageable Interest Coverage 6.3x Strong Cash on Hand $10.8B Solid Buffer Total debt sits at $61.3 billion, up about $6.3 billion after the Confluent deal. EBIT of $12.26 billion covers $1.94 billion in interest 6.3 times. Service costs are not crowding out the dividend.
31 Years of Increases, Slow but Steady Year Annual Dividend 2026 (run rate) $6.76 2025 $6.72 2024 $6.66 2023 $6.63 2022 $6.59 Growth is slow, near 1% annually recently, but uninterrupted. IBM has paid quarterly dividends every year since 1916.
Krishna Backs Up the Cash Story CEO Arvind Krishna told investors on the Q1 2026 call: “Given this strong start, we continue to expect more than 5 percent constant currency revenue growth and an increase of about $1 billion in year-over-year free cash flow in 2026.” Guiding to roughly $15.7 billion of FCF against a $6.3 billion dividend obligation gives management plenty of room.
Verdict: Safe, With Eyes on the Balance Sheet Dividend Safety Rating: Safe. FCF covers the payout nearly 2x, interest coverage is north of 6x, and management is guiding to higher cash generation. I would be comfortable owning IBM for income if the software and Red Hat acceleration continues funding the dividend organically. I would get cautious if acquisition-driven debt climbs past 3.5x EBITDA or FCF guidance slips. For now, this is a cash-rich AI sanctuary that fits a retiree’s portfolio.
Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and IBM didn't make the cut. Grab the names FREE today.
IBM představila technologii pro výrobu čipů menších než 1 nanometr, která má zlepšit výkon i energetickou efektivitu pro AI. Produkce by mohla začít do pěti let.
Visitors walk past IBM logo at the Mobile World Congress (MWC) in Barcelona, Spain, March 3, 2026. REUTERS/Nacho Doce Purchase Licensing Rights, opens new tab
June 25 (Reuters) - IBM (IBM.N), opens new tab on Thursday unveiled what it said was the world's first technology capable of producing chips smaller than one nanometer, as tech companies race to build semiconductors that can handle increasingly demanding AI workloads.
Shares of the Armonk, New York-based company rose over 6% in premarket trading. They have fallen about 11% so far this year.
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The announcement comes at a time when chipmakers are searching for ways to maintain the decades-long trend of cramming more computing power into smaller spaces, a phenomenon known as Moore's Law.
The new chip technology, which bolsters IBM's position to compete with contract chipmakers TSMC (2330.TW), opens new tab and Intel (INTC.O), opens new tab, has a transistor architecture of 0.7 nanometers, or 7 angstroms.
Last week, Intel said the new generation of its 18A manufacturing process, which makes 1.8 nanometer chips, moved into risk production, the testing phase before commercial manufacturing.
IBM said the 0.7-nanometer chip packs nearly 100 billion transistors onto a fingernail-sized surface, about twice the density of its 2-nanometer chip unveiled in 2021, delivering up to 50% higher performance or 70% greater energy efficiency.
To get there, IBM developed a new transistor design called "nanostack". Instead of laying transistors flat, the design stacks them on top of each other in three dimensions, fitting more into the same volume of space.
"With our new nanostack architecture, we’re not just making smaller transistors, we’re reinventing how chips are built to deliver dramatically more power and energy efficiency,” director of IBM Research Jay Gambetta said.
IBM says production could begin within five years. The company has previously licensed chip technologies to Samsung (005930.KS), opens new tab and Japan's Rapidus. It has not announced a manufacturing partner for this technology.
Reporting by Anhata Rooprai in Bengaluru and Stephen Nellis in San Francisco; Editing by Varun H K and Devika Syamnath
Our Standards: The Thomson Reuters Trust Principles., opens new tab
IBM uzavřelo strategickou spolupráci s OpenAI, aby integrovalo AI přímo do kybernetické bezpečnosti a posílilo obranu proti hrozbám. Součástí je i Project Lightwell za 5 miliard USD pro bezpečnost open-source ekosystému.
Key Takeaways IBM partnered with OpenAI to embed AI into cybersecurity operations and strengthen threat defense.IBM's AI security tools identify high-risk code areas and help reduce false positives in vulnerabilities.IBM's $5B Project Lightwell aims to improve security across the open-source software ecosystem. International Business Machines Corporation (IBM - Free Report) recently announced that it has formed a strategic collaboration with OpenAI. The collaboration focuses on taking AI capabilities beyond just improving productivity and efficiency and integrating AI directly into an organization’s cybersecurity operations.
As enterprise accelerate their digital transformation initiatives, they are getting exposed to increasingly sophisticated cyberthreats. The attackers are using AI to generate phishing campaigns and discover vulnerabilities. Legacy security mechanisms often fall short against this growing sophistication of cyberthreats.
IBM is taking several initiatives to address these issues. IBM’s newly introduced AI-powered application security service reviews application code and architecture to identify potential weaknesses. Large organizations often have millions of lines of code. IBM’s AI solution can help in finding out and determining the high-risk areas. OpenAI’s cyber capabilities can help determine whether a vulnerability is actually exploitable or not. The capability of validating vulnerabilities eliminates one of the biggest issues in cybersecurity, which is false positives.
The collaboration with OpenAI will act as a catalyst for IBM’s project Lightwell. The project aims to improve security across the open-source software ecosystem. IBM has committed $5 billion to this project. Such investment in innovation and strategic collaboration will likely boost IBM’s commercial prospects in the growing cybersecurity space.
Other Tech Firms Expanding into AI-Integrated Security DomainCisco Systems, Inc. (CSCO - Free Report) is infusing AI across Security and Collaboration platforms and building agent-based workflows to reduce manual work for customers. Its comprehensive portfolio includes products like Cisco AI Defense that focus on securing an enterprise’s AI transformation. Cisco Secure Access protects against threats from third-party and shadow AI apps and helps in secure Gen AI use. Cisco is also using Splunk’s portfolio to expand Threat Intelligence, Detection and Response capabilities and to connect observability data with security analytics. Cisco acquired Splunk in 2024.
CrowdStrike, Inc. (CRWD - Free Report) continues to leverage AI and machine learning to drive superior security outcomes and operational efficiency. The company is positioning Falcon as an AI security infrastructure and highlighted being selected as a launch partner in both Anthropic’s Project Glasswing and OpenAI’s Trusted Access for Cyber programs. CrowdStrike launched the Charlotte AI AgentWorks ecosystem, a no-code development platform created with AWS, NVIDIA and OpenAI to build and scale custom security agents on Falcon. CrowdStrike also expanded GovCloud offerings to accelerate public sector AI adoption.
IBM’s Price Performance, Valuation & EstimatesIBM shares have declined 9% over the past year against the industry’s growth of 226.9%.
Image Source: Zacks Investment Research
From a valuation standpoint, IBM trades at a forward price-to-sales ratio of 3.41, below the industry average of 7.35.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have remained unchanged over the past 60 days, while the same for 2027 have increased.
Image Source: Zacks Investment Research
IBM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Akcie IBM v premarketu vzrostly téměř o 5 % poté, co JPMorgan zvýšil hodnocení na Overweight díky sílícímu softwaru a očekávanému přínosu AI. Software tvoří asi 45 % tržeb IBM, ale zhruba dvě třetiny konsolidovaného zisku.
Shares of IBM climbed nearly 5% in premarket trading on Tuesday after JPMorgan upgraded the technology company, citing increasing confidence in its software business and potential benefits from growing artificial intelligence adoption.
JPMorgan analyst Brian Essex upgraded IBM to Overweight from Neutral and raised his price target to $291 from $270.
The analyst said expectations for software acceleration in the second half of 2026 have strengthened the firm's outlook on the stock.
The upgrade comes as IBM continues a multiyear transformation from a hardware and services provider into a software-led platform focused on hybrid cloud and artificial intelligence technologies.
JPMorgan highlighted several growth drivers, including momentum from Red Hat and OpenShift migration activities.
The firm pointed to OpenShift's role in supporting the adoption of IBM's AI-driven container platform among enterprises.
The analysts also noted accelerating automation demand following IBM's acquisition of HashiCorp, which management said is receiving increasing support from senior corporate executives.
IBM's software segment has become the primary earnings engine for the company.
According to JPMorgan, software now accounts for roughly 45% of IBM's revenue but generates approximately two-thirds of consolidated profit.
"We view the continued shift toward software as positive considering the higher-margin, ratable nature of software with better cash conversion and a higher-quality earnings stream that supports a higher multiple than the hardware and services businesses," the analysts said.
JPMorgan also said that if IBM becomes a significant beneficiary of rising AI demand, the stock could see further valuation expansion.
Separately, Morgan Stanley raised its price target on IBM to $267 from $225 while maintaining an Equal Weight rating.
The firm noted that recent earnings reports from Dell and Hewlett Packard Enterprise demonstrated that enterprise server demand has remained stronger than expected despite higher prices driven by compute shortages, hardware refresh cycles and growing AI infrastructure requirements.
Morgan Stanley added that Wall Street expectations for 2026 and 2027 "look too low" and increased its earnings-per-share estimates by 5% to 6% for companies with exposure to computing demand.
IBM may also benefit from fresh support for quantum computing from the US government.
Chief Executive Officer Arvind Krishna attended the White House on Monday as President Donald Trump signed two executive orders designed to accelerate domestic quantum computing development and strengthen cybersecurity protections against quantum-powered threats.
The first executive order directs the development of "the first-ever quantum computer powerful enough for scientific research," with the goal of locating the system in a national laboratory by 2028.
The second order accelerates the federal government's transition to post-quantum cryptography by 2031.
"When President Trump published a letter to me in early 2025, he prioritized quantum as a key industry for America to lead the world alongside AI and nuclear energy," said Michael Kratsios, the president's top advisor on science and technology policy.
Industry participants are working toward achieving fault tolerance by the end of the decade, a milestone that would allow quantum computers to operate reliably even when individual components experience failures or disruptions.
The latest policy initiatives add another potential growth catalyst for IBM as it expands its presence in artificial intelligence, hybrid cloud software, and next-generation computing technologies.
