Goldman Sachs on Thursday reiterated a Buy rating on IBM (NYSE:IBM) and kept a $350.00 price objective after the technology company reported fourth-quarter results that topped analyst forecasts. The stock, which carries a market capitalization of $276 billion, has climbed 33.7% over the past 12 months, outpacing many rivals in the IT services sector.
Earnings and revenue performance
IBM posted fourth-quarter revenue of $19.69 billion, ahead of the Street consensus of $19.22 billion. On a comparative basis, total revenue from continuing operations rose 9% in constant currency and 12% in nominal terms. Within the business mix, Software revenue increased 10.7% in constant currency, while Infrastructure revenue expanded by 16.6% - both figures were above analyst expectations.
The company reported earnings per share from continuing operations of $4.52, comfortably above the Street estimate of $4.30. Non-GAAP gross margin was 61.8%, slightly higher than the consensus of 61.3%.
Free cash flow for the quarter reached $7.55 billion, materially exceeding the Street projection of $6.48 billion and up from $6.16 billion in the comparable period a year earlier.
Generative AI backlog and consulting
IBM highlighted momentum in its Generative AI backlog, which reached $12.5 billion during the quarter, an increase of approximately $3.0 billion quarter-over-quarter. The company’s Consulting revenue grew 1.0% in constant currency, a pace that fell short of analyst expectations amid what Goldman Sachs described as a "challenging macro backdrop."
Outlook and cash-flow guidance for 2026
For fiscal 2026, IBM guided to constant currency revenue growth of more than 5% and noted a positive foreign exchange impact of 0.5%. Management also projected a roughly $1 billion increase in free cash flow, to about $15.7 billion. That free cash flow outlook exceeds Goldman Sachs’ internal estimate of $15.2 billion and the Street consensus of $15.0 billion.
Valuation and income profile
InvestingPro identifies IBM as a prominent participant in the IT Services industry, and the stock currently trades at a price-to-earnings ratio of 35.2 - a level that the InvestingPro assessment suggests may be elevated relative to near-term earnings growth expectations. IBM also offers a dividend yield of 2.28% and has paid dividends for 55 consecutive years, a feature that continues to attract income-focused investors.
Analyst reactions and competitor views
The quarter drew varied responses from Wall Street. Evercore ISI reiterated an Underperform rating and a $330 price target, projecting revenue of $19.2 billion and earnings per share of $4.29, with expectations that the Infrastructure segment and Consulting improvements will drive results. By contrast, RBC Capital kept an Outperform rating, expecting solid year-end results with potential upside to revenue and free cash flow. Stifel reiterated its Buy rating, pointing to improved software execution and growth prospects. Bank of America Securities raised its price target from $315 to $335 and maintained a Buy rating, while noting an expectation of a modest 2026 following a strong 2025 and highlighting possible profit-margin implications related to workforce changes.
Commercial partnerships and product initiatives
Separately, IBM extended its long-standing technology partnership with the Wimbledon tennis tournament, continuing their collaboration on AI-powered digital experiences.
Bottom line
Goldman Sachs’ reaffirmation of a Buy rating and a $350 price target follows a quarter in which IBM beat revenue, earnings and cash-flow estimates, extended its Generative AI backlog materially and raised its multi-year free cash flow target. The company’s valuation metrics and consulting revenue softness are noted as areas to watch, while the dividend track record and sizable cash-flow guidance remain central to investment rationale.