International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Making Waves on Wall Street. On January 29, Stifel analyst David Grossman raised the price target on the stock to $340 from $325 while maintaining a Buy rating. IBM remains top large-cap defensive pick, with analysts highlighting its FCF beat, robust software growth, and 2026 PTI guide. IBM’s fourth-quarter 2025 were in-line or slightly above consensus expectations, with 7% organic revenue growth and 15% earnings per share ...

Core Viewpoint - IBM is positioned as a strong player in the AI sector, with RBC Capital maintaining an Outperform rating and a price target of $350.00 ahead of its earnings report [1][3]. Group 1: Earnings Expectations - RBC anticipates solid results from IBM, expecting an increase in overall revenue and free cash flow [2]. - Investors are particularly focused on whether IBM can sustain its recent momentum as earnings are reported [2]. - The software revenue subcomponents will be closely monitored, with Red Hat facing pressure but expected to recover and contribute to growth by fiscal 2026 [2]. Group 2: Investment Perspective - RBC views IBM as a defensive AI investment, highlighting its exposure to hybrid cloud, AI, and long-term opportunities in quantum computing [3]. - The firm continues to favor IBM as a defensive play in the AI market, maintaining its Outperform rating and price target [3].

Core Viewpoint - IBM is positioned as a key player in the AI sector, with analysts expecting its fourth-quarter earnings to meet or slightly exceed consensus estimates, driven by momentum in its Infrastructure segment and improvements in Consulting [1][2]. Financial Performance - IBM is projected to report approximately $19.2 billion in revenue and earnings per share of $4.29 for the fourth quarter [3]. - The company's cost-saving initiatives are anticipated to enhance pre-tax income margins, potentially leading to earnings upside [3]. Cost-Saving Initiatives - IBM's efficiency initiatives are expected to yield an estimated $4.5 billion in gross run-rate savings by the end of 2025 [4]. - The company is likely to provide guidance for 2026 during the earnings report, with expectations of growth at the lower end of its mid-single-digit target range and at least one percentage point of pre-tax income margin expansion [4]. Key Areas of Interest - Investors will be focused on additional metrics such as AI bookings, revenue details, and the integration of Confluent [5]. - IBM is recognized as a pioneer in artificial intelligence, offering consulting services and a range of AI software products [5].

Core Viewpoint - IBM is recognized as a significant player in the AI sector, with analysts highlighting its potential for growth and stability, particularly through software-led initiatives and margin expansion [1][2]. Group 1: Stock Performance and Valuation - Stifel analyst David Grossman has reiterated a Buy rating on IBM with a price target of $325.00, viewing it as a safe compounder benefiting from software-led growth and margin expansion [1]. - IBM is currently trading at a 40% premium to the equal-weight S&P 500 multiple, which aligns with its long-term average range of 20-55%, but is above the pre-2025 trend of around 10-20% [2]. Group 2: Growth Projections - Stifel anticipates organic software growth of approximately 7-8%, consistent with expected performance in 2025, with software acquisitions expected to provide additional growth tailwinds into 2027 [3]. - Services fundamentals, which account for about 32% of IBM's revenue, are seen as bottoming out and showing signs of modest improvement [3]. Group 3: Margin Expansion and Estimates - There is continued potential for margin expansion in 2026 and 2027, with Stifel maintaining its 2026 estimates, which are largely in line with consensus [4]. - The Confluent acquisition has not yet closed and is not reflected in estimates, but it is expected to be modestly dilutive to 2026/2027 EPS and free cash flow [5]. Group 4: Financial Estimates - The company is maintaining its 2026 estimates with revenue growth of 4%, constant currency margins increasing by 75 basis points, EPS growth of 8% to $12.23, and free cash flow growth of 7% to $15 billion [5]. - A stronger USD has reduced the 2026 foreign exchange tailwind from 90 basis points to 40 basis points [5].

Even though enthusiasm around artificial intelligence continues to build, some market watchers are beginning to question what could come next. Take Brad Conger, Chief investment officer at Hirtle Callaghan, for instance, who believes that the buzz around these AI stocks may be running ahead of their underlying business models.Conger believes that a lot of spending behind AI firms isn’t really self-sustaining. While it is true that the demand for AI compute remains undeniably strong, much of it is being gene ...

Core Viewpoint - IBM is positioned as a significant player in the AI sector, with analysts optimistic about its upcoming quarterly results and long-term growth potential [1][2]. Group 1: Quarterly Results Expectations - Evercore ISI anticipates IBM will report Q4 results that are in line with or slightly better than expectations, driven by strengths in Infrastructure and improvements in Consulting [2]. - The firm expects IBM's cost-saving initiatives to yield $4.5 billion in gross run-rate savings by 2025, which will support margin expansion and EPS upside in Q4 [2]. Group 2: Future Guidance and Key Focus Areas - IBM is expected to provide formal guidance for CY26, with initial growth forecasts at the lower end of the mid-single-digit target range and approximately $15 billion in free cash flow [3]. - Investors will be looking for updates on AI bookings, the CFLT acquisition, quantum computing advancements, and the growth trajectory of Software and Consulting [3][4]. Group 3: Specific Updates of Interest - Key updates sought by investors include: 1) AI bookings and revenue disclosures, along with expectations for their contribution to growth in 2026 [4] 2) Details on the CFLT acquisition, including strategy, integration with IBM's software portfolio, and revenue/cost synergy opportunities [4] 3) Progress in Quantum Computing, aiming for quantum advantage by 2026 and an error-corrected computer by 2028 [4] 4) Software growth trajectory for 2026 and Consulting signings that could drive inflection in 2026 [4] 5) Updates on ongoing cost-saving initiatives [4].

Core Viewpoint - International Business Machines Corporation (IBM) is recognized as a trending AI stock, with analysts projecting a robust free cash flow (FCF) outlook and a higher-margin software mix, despite facing near-term headwinds [1]. Group 1: Financial Projections - BofA Securities raised the price target for IBM stock to $335.00 from $315.00 while maintaining a Buy rating, indicating confidence in the company's financial outlook [1]. - Analysts expect a modest year for IBM in 2026, with projected revenue growth of about 5%, driven by strong software growth and modest infrastructure growth [3][4]. - The firm anticipates a workforce rebalancing expense of $400 million in Q4, which is expected to limit full-year 2025 profit before tax (PTI) margin expansion to approximately 70 basis points, below management's guidance of 100 basis points [3]. Group 2: Revenue and Growth Expectations - For fiscal year 2026, IBM is likely to guide software constant currency revenue growth of around 10%, low single-digit percentage growth in consulting, and flat growth in infrastructure, totaling 5% constant currency growth for the company [4]. - The Confluent deal is projected to contribute modestly to software revenue in 2026, although it may be slightly dilutive to earnings [3][4]. - The company is modeling $14.0 billion in FCF for fiscal year 2025 and expects to guide approximately $15 billion in fiscal year 2026, maintaining a 130% net income to FCF ratio [4].

Core Viewpoint - IBM is recognized as a significant player in the AI sector, with recent upgrades indicating a positive outlook for its stock driven by software growth and strategic acquisitions [1][2]. Group 1: Stock Upgrade and Growth Potential - Jefferies upgraded IBM's stock from "Hold" to "Buy," citing a clearer path to software acceleration leading into 2026, primarily due to Red Hat momentum and synergies from recent acquisitions [1][2]. - The strategic acquisitions, including HCP and the pending CFLT deal, are expected to enhance IBM's hybrid cloud and data platform capabilities, creating more cross-sell opportunities and expanding open-source monetization pathways [2]. Group 2: Business Performance and Valuation - IBM's Mainframe business is performing well, contributing to stability and recurring revenue, which supports confidence in the company's near-term execution [3]. - The current trading valuation of IBM is at 26 times the projected earnings for 2027, which presents an upside potential compared to the average of 35 times for large-cap software peers, indicating room for growth in software reacceleration execution [3].

Core Insights - The technology consulting company reported higher first-quarter sales driven by growth in its AI business [1] Group 1 - The increase in sales is attributed to the expansion of the company's AI offerings [1]

Group 1 - IBM is acquiring all outstanding common shares of Confluent for $31 per share in cash, representing an enterprise value of $11 billion [2][3] - The transaction is expected to close by mid-2026 and is subject to normal regulatory and closing conditions, with both companies' boards approving the deal [3] - Confluent's largest shareholders, representing approximately 62% of the company's voting power, have signed voting agreements to support the transaction [3] Group 2 - Bernstein has reiterated its Market Perform rating on IBM with a price target of $280, maintaining a neutral view despite the acquisition announcement [1] - The firm analysts believe that while IBM has potential as an investment, other AI stocks may offer greater upside potential and carry less downside risk [4]