JPMorgan has raised its price objective for IBM (NYSE:IBM) to $317.00 from $312.00 but left the stock's rating unchanged at Neutral, citing an improved operating backdrop even as valuation leaves limited upside at current levels.
At present, IBM trades at a price-to-earnings ratio of 35.23 and carries a market capitalization of $274.96 billion. Data from InvestingPro indicates the shares appear slightly overvalued relative to their Fair Value.
In the most recent quarter IBM delivered 9% year-over-year constant currency revenue growth, along with improved profitability and mid-teen earnings-per-share growth. The company generated $7.6 billion in adjusted free cash flow for the quarter.
For the full fiscal year, IBM reported 6% year-over-year constant currency revenue growth, earnings per share of $11.59, and $14.7 billion in adjusted free cash flow, numbers that outpaced both the company’s guidance and consensus forecasts.
InvestingPro data highlights IBM’s long-standing dividend history — the company has paid dividends for 55 consecutive years and currently yields 2.28% — and assigns the firm a "GOOD" overall financial health score.
Segment performance
Software was a standout, accelerating to 11% year-over-year constant currency growth in the quarter. Mainframe sales, driven by the Z17 platform, were particularly strong, rising 61% year-over-year on a constant currency basis. The Data segment beat expectations, and Technical Platform growth returned to positive territory. By contrast, Hybrid Cloud growth slowed, decelerating to 8%.
Outlook and analyst perspective
Looking ahead to fiscal 2026, IBM guided to revenue growth of 5% or more, expects software to grow about 10% year-over-year, and forecast $15.7 billion in free cash flow. JPMorgan noted that software will likely remain a central focus for investors as it becomes a larger share of IBM’s business mix. Despite the favorable trends, the bank maintained its Neutral rating, describing IBM as "a relatively defensive name with increasingly favorable exposure to Software and AI tailwinds," but signaling a balanced risk/reward at current valuation levels.
IBM’s quarterly results included $19.69 billion in revenue, ahead of analyst expectations of $19.21 billion, and earnings per share of $4.52, above expectations of $4.31. The company’s generative AI-related backlog grew to $12.5 billion from $9.5 billion in the prior period.
Market reactions from other firms
Several other analysts raised their price targets following the report. Wedbush and BofA Securities each set targets at $340, citing strong AI demand and robust quarterly results respectively. Morgan Stanley raised its target to $304, pointing to IBM’s free cash flow performance. BMO Capital increased its target to $350 while describing the quarter as "reasonable" despite some softness in particular segments. Evercore ISI lifted its target to $345, citing broad-based growth across all segments.
Implications
The results and guidance underscore IBM’s pivot toward software and AI-related offerings, alongside durable cash generation. That combination appears to be moderating investor concern about downside risk, even as valuation metrics temper immediate upside potential.