Evercore ISI left its Outperform rating and $345.00 price target on IBM (NYSE:IBM) but took the company off its Tactical Outperform roster after IBM delivered a stronger-than-anticipated fourth quarter.
IBM reported fourth-quarter revenue of $19.7 billion and earnings per share of $4.52, topping consensus forecasts of $19.2 billion and $4.31. On a year-over-year basis, overall sales rose 12% and 9% in constant currency, with growth recorded across all three of the company’s principal business segments.
The Software segment expanded 11% in constant currency. Within that grouping, Data grew 19%, Automation rose 14%, and Transaction Processing increased by 4%. Red Hat advanced 8%, a pace the company said fell short of expectations because of difficult comparisons and headwinds in the U.S. Federal market. IBM signaled that Red Hat growth should improve to 10% in 2026.
Infrastructure revenues were up 17% for the quarter, while Consulting sales increased 1%. Analysts described the software strength as broadly diversified across product categories rather than concentrated in a single area.
Alongside quarterly results, IBM issued guidance for fiscal 2026 that exceeded analysts’ models. The company forecast sales growth of more than 5% in constant currency, a figure that includes roughly a 1 percentage point contribution from Confluent. IBM also projected free cash flow of approximately $15.7 billion for 2026, compared with Street estimates near $14.8 billion.
The strong quarter has prompted a series of price-target revisions from other investment firms. Stifel raised its target to $340 and kept a Buy rating. RBC Capital moved its target to $361, citing the year-end performance and strong free cash flow. JPMorgan adjusted its price target to $317 after IBM reported 9% year-over-year constant-currency revenue growth and $7.6 billion in adjusted free cash flow for the quarter.
Wedbush increased its target to $340 and highlighted momentum in IBM’s generative AI business, noting a GenAI backlog of $12.5 billion. IBM’s reported total revenues of $19.69 billion exceeded the Street estimate of $19.21 billion for the period. Bank of America also raised its target to $340, pointing to the strength in IBM’s Infrastructure segment and significant growth in its Data business.
Evercore’s decision to keep an Outperform rating while removing the Tactical Outperform designation reflects a recalibration after the stronger results and upgraded guidance. The market reaction and follow-on price-target increases from multiple brokerages underscore how the quarter reassessed near-term expectations for IBM’s revenue trajectory and free cash flow generation.
Context and implications
The quarter’s outcomes show growth across IBM’s primary operating areas, with software and infrastructure leading the expansion. IBM’s guidance for 2026 points to a mid-single-digit constant-currency revenue increase and materially higher free cash flow than some sell-side estimates, reinforcing a healthier cash-generation profile for the company.
However, some product-level results, including Red Hat’s 8% growth, signal specific areas where comparisons and sector-specific headwinds (notably in U.S. Federal spending) can constrain near-term performance before improvements anticipated in 2026.