International Business Machines (IBM) AI Stock Analysis

• Market Cap: $232.13B
• Dividend Yield: 2.67%
• Average Volume (3M): 4.84M
• Price to Earnings (P/E): 39.0
• Beta (1Y): 0.63
• Revenue Growth: 1.45%
• EPS Growth: -20.56%
• Country: US
• Employees: 270,300
• Sector: Technology
• Sector Strength: 39
• Industry: Information Technology Services
• EPS (TTM): 6.42
• Shares Outstanding: 927,264,340
• 10 Day Avg. Volume: 5,002,191
• 30 Day Avg. Volume: 4,835,889
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 3.60
• Price to Cash Flow (P/CF): 13.10
• P/FCF Ratio: 12.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $263.33
• Price Target Upside: 8.15% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 14

IBM's overall score reflects its robust financial performance and positive earnings call outlook, tempered by technical indicators suggesting an overbought status and a high valuation. The company's strong cash flow and software growth are significant strengths, while high leverage and valuation concerns are key risks.

Positive Factors

Cost Efficiencies

Cost efficiencies and PTI margin expansion targets are ahead of expectations.

Mergers and Acquisitions

Management comments at the company’s recent Analyst Day reflected a healthier appetite for M&A going forward.

Software Business Growth

Software is becoming the key driver of IBM's revenue, profit, and free cash flow.

Negative Factors

Discretionary Spending Pressure

IBM remains exposed to discretionary spending, which is expected to be pressured this quarter.

Execution Challenges

Near-flawless execution is needed to meet multi-year targets at a premium valuation.

Federal Disruption

Fed comments could weigh on IBM, despite its lower exposure, IBM is not expected to be immune from Federal disruption.

International Business Machines Business Overview & Revenue Model

Company Description

International Business Machines Corporation provides integrated solutions and services worldwide. The company operates through four business segments: Software, Consulting, Infrastructure, and Financing. The Software segment offers hybrid cloud platform and software solutions, such as Red Hat, an enterprise open-source solutions; software for business automation, AIOps and management, integration, and application servers; data and artificial intelligence solutions; and security software and services for threat, data, and identity. This segment also provides transaction processing software that supports clients' mission-critical and on-premise workloads in banking, airlines, and retail industries. The Consulting segment offers business transformation services, including strategy, business process design and operations, data and analytics, and system integration services; technology consulting services; and application and cloud platform services. The Infrastructure segment provides on-premises and cloud-based server and storage solutions for its clients' mission-critical and regulated workloads; and support services and solutions for hybrid cloud infrastructure, as well as remanufacturing and remarketing services for used equipment. The Financing segment offers lease, installment payment, loan financing, and short-term working capital financing services. The company was formerly known as Computing-Tabulating-Recording Co. International Business Machines Corporation was incorporated in 1911 and is headquartered in Armonk, New York.

How the Company Makes Money

IBM generates revenue through multiple streams, primarily focusing on its hybrid cloud and artificial intelligence segments. The company offers cloud services, including infrastructure as a service (IaaS) and platform as a service (PaaS), which are pivotal to its growth strategy. Additionally, IBM earns from software sales, including middleware and operating systems, and provides extensive consulting and IT services to help clients with digital transformation. Hardware sales, particularly mainframes and servers, also contribute to its earnings. Significant partnerships with large enterprises and governments enhance its service reach and revenue potential. Furthermore, IBM's strategic investments in research and development foster innovation, enabling the creation of new products and services that drive future revenue.

International Business Machines Financial Statement Overview

Summary

IBM demonstrates solid financial performance with stable profitability and effective cash flow management. However, the high leverage reflected in the balance sheet may pose risks. The company shows a moderate growth trajectory in revenues, complemented by strong ROE and cash flow ratios, but should be cautious of its relatively low equity ratio.

Income Statement

IBM's TTM (Trailing-Twelve-Months) financials show a moderate gross profit margin of 56.33% and a net profit margin of 9.60%, indicating stable profitability. The revenue growth rate is 1.44% compared to the previous annual period, suggesting modest sales growth. EBIT and EBITDA margins are healthy at 14.09% and 16.27%, respectively, reflecting efficient cost management.

Balance Sheet

IBM's debt-to-equity ratio is high at 2.14, indicating significant leverage. The return on equity is strong at 22.06%, showing effective use of equity to generate profits. However, the equity ratio of 19.91% points to a relatively low equity base compared to total assets, which could pose risks during economic downturns.

Cash Flow

The free cash flow growth rate is minimal at 0.79% compared to the previous year, but the operating cash flow to net income ratio of 2.23 indicates strong cash generation relative to net earnings. Additionally, the free cash flow to net income ratio stands at 2.03, highlighting robust cash flow conversion.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
62.75B	61.86B	60.53B	57.35B	55.18B
	Gross Profit
35.55B	34.30B	32.69B	31.49B	30.86B
	EBIT
6.01B	0.00	0.00	0.00	0.00
	EBITDA
12.18B	14.69B	7.17B	12.41B	10.55B
	Net Income Common Stockholders
6.02B	7.50B	1.64B	5.74B	5.59B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
14.59B	13.44B	8.74B	7.25B	13.81B
	Total Assets
137.18B	135.24B	127.24B	132.00B	155.97B
	Total Debt
58.40B	59.94B	54.01B	55.14B	66.47B
	Net Debt
44.45B	46.87B	46.13B	48.49B	53.26B
	Total Liabilities
109.78B	112.63B	105.22B	113.00B	135.25B
	Stockholders Equity
27.31B	22.53B	21.94B	18.90B	20.60B
Cash Flow		Free Cash Flow
11.76B	12.12B	8.57B	10.41B	15.15B
	Operating Cash Flow
13.45B	13.93B	10.44B	12.80B	18.20B
	Investing Cash Flow
-4.94B	-7.07B	-4.20B	-5.97B	-3.03B
	Financing Cash Flow
-7.08B	-1.77B	-4.96B	-13.35B	-9.72B

International Business Machines Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 243.49
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IBM, the sentiment is Negative. The current price of 243.49 is below the 20-day moving average (MA) of 249.10, below the 50-day MA of 250.37, and above the 200-day MA of 216.64, indicating a neutral trend. The MACD of -0.65 indicates Positive momentum. The RSI at 51.34 is Neutral, neither overbought nor oversold. The STOCH value of 61.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for IBM.

International Business Machines Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACN	75 Outperform	$196.31B	25.88	27.26%	1.84%	4.10%	9.78%
INFY	75 Outperform	$72.90B	21.73	33.16%	2.39%	3.08%	11.92%
CTSH	72 Outperform	$37.81B	16.96	16.21%	1.65%	1.98%	7.16%
WIT	68 Neutral	$31.45B	27.26	16.59%	2.10%	-3.41%	67.87%
IBM	67 Neutral	$232.13B	38.95	24.14%	2.67%	1.45%	-20.56%
Sector *	57 Neutral	$20.94B	10.43	-13.41%	2.52%	4.53%	-23.34%
FIS	51 Neutral	$39.50B	52.59	4.65%	1.98%	-17.38%	―

International Business Machines Corporate Events

IBM Updates Revenue Reporting Categories for 2025

IBM announced changes to its revenue reporting categories within its Software and Consulting segments, effective from the first quarter of 2025. These updates aim to better align with market opportunities and provide more relevant information to investors, without affecting IBM’s consolidated financial statements. The changes involve recasting historical financials for 2023 and 2024 and adjusting revenue categories to reflect the company’s strategic focus on hybrid cloud, automation, data, and transaction processing. This move is intended to enhance transparency and allow investors to update their financial models ahead of the first quarter earnings report in April 2025.

IBM Emphasizes Hybrid Cloud and AI Strategy

On February 4, 2025, IBM’s Investor Day highlighted its strategic focus on hybrid cloud and AI technologies. The company reported achieving its 2024 financial targets, including revenue growth and the highest free cash flow margin in its history. IBM’s strategy involves leveraging its extensive partner network and investing in innovation to drive sustainable growth. The company’s performance metrics and non-GAAP financial disclosures aim to provide investors with a clear understanding of its financial health and operational efficiency.

IBM Reports Q4 2024 Growth and AI Leadership

In its fourth-quarter 2024 earnings presentation on January 29, 2025, IBM reported a revenue growth of 3% and $12.7 billion in free cash flow. The company highlighted significant achievements with its Software segment growing 9%, and Red Hat achieving double-digit growth. Despite some challenges in Consulting, IBM expressed confidence in future growth driven by technology momentum and strategic partnerships. The company also emphasized its leadership in generative AI, with a growing book of business and a focus on AI-driven business transformations. Looking ahead, IBM anticipates revenue growth of over 5% in 2025, supported by its enhanced portfolio and culture of innovation.