Evercore ISI increased its price target on IBM (NYSE:IBM) to $345.00 from $330.00 while keeping an Outperform rating following the company’s December quarter results. At the time of the update, IBM shares were trading at $294.16, and analyst targets for the name ranged from $210 to $375, according to InvestingPro data.
IBM reported quarterly revenue of $19.7 billion and diluted earnings per share of $4.52, both above consensus. Earlier in the coverage of the quarter, IBM's results were contrasted with analyst expectations of roughly $19.2 billion in sales and $4.31 in EPS. In a separate notation of the quarter’s consensus, the company’s EPS of $4.52 also exceeded a $4.29 forecast and revenue beat versus a $19.22 billion estimate. The firm delivered broad-based growth across its three operating segments, with total sales rising 12% year-over-year and 9% on a constant-currency basis.
Across IBM’s software portfolio, management reported 11% growth in constant currency. Within that cohort, Data grew 19%, Automation expanded 14% and Transaction Processing increased 4%. Red Hat posted growth of 8%, a pace described as below street expectations and influenced by tough year-ago comparisons and headwinds in the U.S. Federal government vertical. Management stated an expectation for Red Hat to improve to 10% growth in 2026.
On a trailing-twelve-month basis, IBM generated $65.4 billion of revenue and diluted EPS of $8.37. InvestingPro data flagged a P/E ratio for the stock of 35.2, indicating a relatively rich valuation by that measure. Free-cash-flow metrics were also highlighted in the report: IBM announced guidance implying free cash flow of roughly $15.7 billion for 2026, above consensus Street expectations of $14.8 billion. The company’s current levered free cash flow was reported at $12.5 billion with a free cash flow yield of 5%.
For 2026, IBM guided to sales growth of more than 5% at constant currency, a target that includes approximately one percentage point of contribution from Confluent. Evercore characterized that guidance as "fairly conservative" and outlined potential upside scenarios. The firm pointed to several discrete drivers that could lift results beyond the guidance, including an acceleration at Red Hat, continued momentum from the z17 mainframe refresh cycle, improved performance in Transaction Processing, and additional cost savings.
InvestingPro assigns IBM a financial health score of 2.58, categorized as "GOOD." The data also note IBM’s long-standing dividend record, with the company having raised its payout for 30 consecutive years.
Analysts and investors will be watching how the mix of software, infrastructure, and services evolves against the company’s guidance and margin objectives. Evercore’s adjustment to its price target reflects the combination of a quarter that outperformed near-term estimates and company guidance that the firm views as conservative relative to potential operational upside.
Context and implications
IBM’s December quarter results underpinned a higher valuation in Evercore’s model, with the firm maintaining a constructive stance via an Outperform rating. The key takeaways from the quarter include above-consensus revenue and EPS, differentiated growth across software subsegments, an improving outlook for Red Hat by 2026, and free cash flow guidance that exceeded Street forecasts.
Investors weighing IBM’s prospects must balance those operational beats and the company’s FCF guidance against a relatively high P/E and the range of analyst price targets that extend as low as $210 and as high as $375.