Wedbush has raised its price target for IBM to $340.00 from $325.00 and retained an Outperform rating, attributing the move to momentum in the company’s generative AI operations. IBM shares, trading at $294.16, are moving closer to that level as analyst targets for the stock span a wide range from $210 to $375. InvestingPro data indicates the shares are trading near their Fair Value and shows a P/E ratio of 35.23.
Executives reported a notable expansion in IBM’s GenAI backlog, which reached $12.5 billion versus $9.5 billion in the prior period, a sign of growing demand for the company’s AI agent capabilities. For the reported period, total revenues were $19.69 billion, up 9% year-over-year in constant currency and above the Street consensus of $19.21 billion. That result sits alongside IBM’s annual revenue of $65.4 billion and 4.5% revenue growth over the trailing twelve months, reinforcing its position in the IT Services industry.
Breaking the top line down by business:
- Software: Revenue reached $9.03 billion, an 11% increase year-over-year in constant currency, beating expectations of $8.77 billion. The software mix benefited from strength across IBM’s portfolio, with automation delivering 14% growth.
- Infrastructure: Revenue totaled $5.13 billion, up 17% year-over-year in constant currency and exceeding the $4.73 billion estimate, supported by demand for the z17 mainframe driven by on-premises and AI workloads.
- Consulting: Consulting revenue was $5.35 billion, up 1% year-over-year in constant currency but narrowly missing the Street’s $5.37 billion estimate, reflecting steady client demand for AI-related business transformation services.
Profitability metrics showed mixed execution. On a non-GAAP basis, gross margins came in at 61.8%, ahead of the expected 61.3%. Non-GAAP pre-tax income margin was 24.1%, below the 25.1% estimate, with the shortfall attributed to workforce rebalancing charges. InvestingPro data also reports a gross profit margin of 57.8% and assigns IBM a Financial Health Overall Score of 2.58, categorized as GOOD.
Cash generation strengthened year-over-year. Free cash flow improved to $7.55 billion from $6.20 billion in the comparable year-ago period, reflecting productivity gains and cost discipline that management has emphasized, while the ongoing shift toward software contributes additional operating leverage. Levered free cash flow is reported at $12.47 billion with a free cash flow yield of 5%. The company continues a long dividend track record, having paid dividends for 55 consecutive years and currently offering a yield of 2.28%.
Investor reaction among sell-side firms has been favorable following the results. In the wake of the quarter, BofA Securities lifted its price target on IBM to $340 and maintained a Buy rating. Evercore ISI increased its target to $345, pointing to broad-based growth across all three segments. BMO Capital set a $350 target, highlighting solid Data growth and free cash flow despite relative softness in Red Hat and Consulting. Morgan Stanley raised its target to $304, citing free cash flow performance that reached $14.7 billion and exceeded initial guidance.
Separately, IBM reported fourth-quarter 2025 results that topped estimates, producing earnings per share of $4.52 versus a forecast of $4.29 and revenue of $19.7 billion compared with expectations of $19.22 billion. These results, together with the expanding GenAI backlog and improving cash generation, have prompted multiple upward revisions to analyst price objectives.
While the company’s overall performance shows pockets of strength across software, infrastructure and cash flow metrics, certain segments such as Consulting and Red Hat were identified as having mixed dynamics in the sell-side commentary. Market participants and analysts are now weighing these mixed signals against the backdrop of advancing AI demand when updating valuations and target prices.
Key takeaways
- Wedbush raised its IBM price target to $340 and retains an Outperform rating amid GenAI momentum.
- IBM reported revenue and segment results that generally beat expectations, with a notable $12.5 billion GenAI backlog and improved free cash flow.
- Several other brokers increased targets after the quarter, reflecting confidence in free cash flow and broad-based segment growth.
Risks and uncertainties
- Profitability headwinds from workforce rebalancing charges reduced the non-GAAP pre-tax margin below expectations - a near-term earnings risk that affects overall margin profiles.
- Certain segments, including Consulting and Red Hat, showed softer trends relative to other areas; variability within these business lines could affect revenue mix and valuation.
- Analyst price targets remain dispersed ($210 to $375), reflecting continued uncertainty among market participants about the appropriate valuation level despite recent positive indicators.
Overall, the company’s reported results and outlook for GenAI demand have catalyzed a set of higher targets from major brokerages, underscoring stronger momentum in AI-related services and improved cash flow while leaving some segment-level questions that investors are monitoring.