Information technology and consulting giant International Business Machines (IBM) may be one of the oldest giants in technology, but it is proving that there is plenty of life left in the legacy. The stock has been rising this year thanks to strong fundamentals and a new artificial intelligence (AI) angle that is capturing investors’ attention. Strong third-quarter results and an intense pipeline of projects in artificial intelligence, hybrid cloud and even quantum computing have fueled renewed enthusiasm.
But even with the stock already near its 52-week high, analysts maintain there are more clues on the horizon. And one of the most optimistic voices on Wall Street right now is Oppenheimer, who gives an “outperform” rating and a bold $360 price target, the highest call on Wall Street yet. Analyst Param Singh believes investors are still stuck considering IBM as the old-school legacy name.
In his view, the company’s evolution toward a software-centric business is becoming very real, driven by the expected double-digit growth of HashiCorp, the multi-cloud automation leader that IBM acquired earlier this year, along with improving traction at Red Hat. But Singh’s biggest confidence boost comes from IBM’s growing push toward AI applications and generative AI tools, an area he believes the market has yet to appreciate.
So, with analysts pointing to underappreciated potential, IBM stock may be primed for a stronger bullish move.
Founded in 1911, IBM is a major force in hybrid cloud, artificial intelligence and enterprise services, supporting customers in more than 175 countries. Its technology helps organizations leverage their data, optimize operations, reduce costs and remain competitive. Government agencies and leading companies in critical industries such as finance, telecommunications and healthcare rely on IBM’s hybrid cloud platform and Red Hat OpenShift for secure and efficient digital transformation.
With continued innovation in artificial intelligence, quantum computing, and industry-specific cloud tools, IBM offers flexible solutions that meet evolving business technology needs. So far this year, shares of this New York-based tech giant have seen a return of 38.51%, outperforming the broader S&P 500 Index ($SPX), which has gained about 15.03% in 2025. The stock hit a new 52-week high of $324.90 on Nov. 12 and is only down about 6.71% since that peak. The company’s market capitalization currently stands at approximately $284 billion.
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In addition to its consistent price increases, IBM continues to provide value to income-focused investors. Since 1916, the company has consistently paid quarterly dividends. And with a remarkable 30 consecutive years of dividend increases under its belt, the company proudly holds the coveted Dividend Aristocrat status.
Most recently, on October 22, IBM announced a quarterly dividend of $1.68 per share, payable on December 10. That brings its anticipated annualized payout to $6.72 per share, which translates to a healthy 2.26% yield. The company also returned approximately $1.6 billion to shareholders through dividends during the third quarter.
On October 22, IBM released its fiscal 2025 third-quarter earnings report, which clearly beat Wall Street forecasts. Revenue was about $16.3 billion, up 9% year-over-year, marking the fastest growth in several years and beating the consensus estimate of $16.1 billion. Profitability showed even greater improvement.
During the quarter, the company reported net income of $1.74 billion, or $1.84 per share, a notable turnaround from the loss of $330 million, or $0.36 per share, reported a year ago. On an adjusted basis, EPS of $2.65 rose 15.2% year-over-year and comfortably beat Wall Street estimates of $2.44. A closer look shows that the growth was spread across all major segments.
Software revenue totaled about $7.2 billion, up about 10%, driven by automation tools and continued momentum from Red Hat/OpenShift. Infrastructure saw a stronger year-over-year increase of 17% to $3.6 billion, driven by the rise of IBM Z mainframes above 50%. Consulting, meanwhile, returned to growth with low-single-digit earnings, about $5.3 billion, after quieter quarters. Cash flow trends also moved in the right direction.
IBM reported $3.1 billion in net cash from operating activities, a year-over-year increase of $200 million. Free cash flow amounted to $2.4 billion, an increase of $300 million from last year. IBM ended the quarter with $14.9 billion in cash, restricted cash and marketable securities, an improvement of $100 million compared to the end of 2024.
Reflecting on the third quarter performance, CEO Arvind Krishna highlighted strong customer adoption, saying, “Customers around the world continue to leverage our technology and domain expertise to drive productivity in their operations and deliver real business value with AI.” The CEO also revealed that the company’s AI business portfolio now exceeds $9.5 billion, up from $7.5 billion just a quarter ago.
Thanks to the company’s strong momentum, IBM raised its full-year 2025 guidance. The company now expects revenue growth of more than 5%, compared to the previous outlook of at least 5%. Management also expects free cash flow to hit $14 billion for the year, up from its previous estimate of $13.5 billion.
Overall, Wall Street remains bullish on IBM. The broadest consensus is a “moderate buy”. Of the 22 analysts covering the stock, eight rate it a “strong buy,” one rates it a “moderate buy,” 11 say a “hold,” and two recommend a “strong sell.” Although IBM has already surpassed Wall Street’s average price target of $289.62, Oppenheimer still sees plenty of room for upside.
The company’s target of hitting a street high of $360 suggests the stock could rally another 18.23% from current levels. With software becoming a bigger driver of the business and margins continuing to improve, Oppenheimer believes IBM is on the verge of a valuation reset, especially as more investors recognize how far the company’s transformation has come.
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On the date of publication, Anushka Mukherji had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
