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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on IBM

IBM's recent performance is driven by its robust Q3 results, with revenue reaching $16.3 billion, up 9% year-over-year. The company's AI book of business exceeds $9.5 billion, fueling growth prospects. Strategic partnerships, particularly in hybrid cloud and AI, have positioned IBM for long-term profitable growth. Analysts view IBM as a "dynamic" stock to own in the AI revolution, with Wedbush analysts expecting another solid quarter. The company's dividend yield stands out at 2.14% in the tech sector, supporting dividend stability.

1.c. Company Highlights

2. IBM's Q3 2025 Earnings: Strong Revenue Growth and Rising Expectations

IBM reported strong financial performance for the third quarter of 2025, with revenue growth accelerating to 7%, the highest in several years. The company's earnings per share (EPS) came in at $2.65, beating analyst estimates of $2.45. Revenue was fueled by software growth of 9%, led by automation, up 22%, and infrastructure growth of 15%, driven by z17. The company's free cash flow reached $7.2 billion through the first nine months, a record high.

Publication Date: Oct -23

📋 Highlights
  • Revenue Growth Acceleration:: IBM's Q3 2025 revenue grew 7%, the highest in years, driven by hybrid cloud and AI with all segments showing sequential acceleration.
  • Free Cash Flow Record:: Generated $7.2 billion in free cash flow YTD, a $600 million increase YoY, with a raised annual guidance to $14 billion.
  • AI Book of Business Momentum:: Gen AI inception reached $9.5 billion, with consulting AI book accelerating to $1.5 billion in Q3, contributing 22% of IBM's backlog.
  • Software Segment Growth:: Software revenue grew 9%, led by automation (+22%) and Red Hat's 12% Q3 growth, including 40% bookings growth in OpenShift.
  • Productivity Savings Target:: Annual productivity savings expected to reach $4.5 billion by year-end, supporting IBM's $4.7 billion in shareholder returns YTD.

Segment Performance

All segments showed sequential acceleration, driven by hybrid cloud and artificial intelligence. Software revenue growth is expected to approach double digits, while infrastructure is expected to contribute over 1.5 points to IBM's revenue growth. The Gen AI book of business continues to show momentum, at over $9.5 billion inception to date, and consulting generative AI book of business accelerated to over $1.5 billion in the quarter.

Raising Expectations

Given the strong performance, IBM raised expectations for revenue growth to more than 5% and free cash flow to about $14 billion for the year. The company also raised its expectations for adjusted EBITDA growth to mid-teens. As Arvind Krishna noted, AI is a strong contributor to software growth and a big piece of why consulting is returning to growth.

Valuation Metrics

With a P/E Ratio of 45.81 and EV/EBITDA of 25.08, the market seems to have priced in a significant growth premium. The company's ROE of 21.98% and ROIC of 8.48% indicate a strong return on equity and invested capital. Analysts estimate next year's revenue growth at 4.5%, which may be conservative given the company's recent performance.

Outlook

The company expects organic growth in software to continue, with Red Hat expected to return to mid-teens growth, transaction processing (TP) to grow in low single digits, automation to grow in double digits, and data and AI portfolio to grow in mid to high single digits in 2026. With a strong portfolio and focus on productivity, IBM is well-positioned for 2026.

Red Hat Performance

Red Hat delivered 12% growth, with a 13% year-to-date growth rate. Key performance areas include OpenShift with 40% bookings growth, ARR of $1.8 billion up mid-thirties year over year, Virtualization with over $400 million in total contract value of bookings, and Ansible with 20% bookings growth.

3. NewsRoom

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Leon Stok of IBM Elected Chair of Silicon Integration Initiative Board

01:54

Source: businesswire.com

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Traders Are Still Skeptical Of IBM Stock After 40% Run in 2025

Dec -04

Source: 247wallst.com

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International Business Machines Corporation $IBM Stake Increased by Edgestream Partners L.P.

Dec -04

Source: defenseworld.net

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Better Quantum Computing Stock: D-Wave Quantum vs. IBM

Dec -04

Source: fool.com

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International Business Machines Corporation $IBM Shares Sold by 1832 Asset Management L.P.

Dec -03

Source: defenseworld.net

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The $8 Trillion AI Mirage: IBM Says The Math Just Doesn't Work

Dec -02

Source: benzinga.com

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Beacon Pointe Advisors LLC Sells 4,632 Shares of International Business Machines Corporation $IBM

Dec -02

Source: defenseworld.net

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Can IBM's Tie-Up With Cisco for Quantum Network Aid Its Shares?

Dec -01

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.33%)

6. Segments

Software

Expected Growth: 12.1%

International Business Machines Corporation’s software products enable customers to integrate and manage their business operations, driving growth through enhanced operational efficiency, increased productivity, and improved decision-making capabilities.

Consulting

Expected Growth: 8.2%

IBM's Consulting segment is driven by increasing demand for digital transformation, cloud migration, and business process outsourcing. Clients seek innovative solutions to improve operational efficiency, driving growth in consulting services.

Infrastructure

Expected Growth: 10.4%

International Business Machines Corporation's IT infrastructure services, cloud and technology services will drive growth, propelled by digital transformation, increased adoption of hybrid cloud, and rising demand for IT outsourcing.

Financing

Expected Growth: 5.5%

IBM’s Financing segment growth is driven by increasing demand for IT acquisitions, particularly in cloud, analytics, and AI. This growth is further fueled by the need for flexible financing solutions, enabling businesses to invest in strategic IT initiatives.

Other - Divested Businesses

Expected Growth: 4.5%

IBM's divested businesses, like Watson Health, are expected to thrive in the growing digital health and AI markets, with increasing demand for cloud-based services driving growth.

Unallocated Other

Expected Growth: 4.3%

International Business Machines Corporation's growth is driven by increasing adoption of artificial intelligence and cloud computing, and strategic acquisitions, positioning it for long-term growth.

7. Detailed Products

Hardware

IBM offers a range of hardware products, including servers, storage systems, and networking equipment.

Software

IBM provides a wide range of software products, including AI, analytics, blockchain, cloud, and IoT solutions.

Services

IBM offers a range of services, including consulting, implementation, and management services for IT and business processes.

Cloud

IBM Cloud is a cloud computing platform that provides infrastructure, platform, and software as a service.

Artificial Intelligence

IBM offers a range of AI solutions, including Watson, that enable businesses to automate decision-making, improve customer service, and optimize operations.

Blockchain

IBM Blockchain is a decentralized, distributed ledger technology that enables secure, transparent, and tamper-proof transactions.

Internet of Things (IoT)

IBM IoT solutions enable businesses to connect, monitor, and analyze data from devices and sensors.

Quantum Computing

IBM Quantum is a quantum computing platform that enables businesses to solve complex problems and simulate complex systems.

8. International Business Machines Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for IBM is moderate, as there are alternative technology solutions available in the market. However, IBM's strong brand reputation and diversified product portfolio mitigate this threat to some extent.

Bargaining Power Of Customers

The bargaining power of customers is low for IBM, as the company has a large and diversified customer base. Additionally, IBM's products and services are often customized to meet specific customer needs, reducing the bargaining power of individual customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low for IBM, as the company has a large and diversified supply chain. IBM's strong relationships with its suppliers and its ability to negotiate favorable terms also reduce the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants is low for IBM, as the company operates in a highly competitive and capital-intensive industry. New entrants would need to invest heavily in research and development, marketing, and sales to compete with IBM's established brand and product portfolio.

Intensity Of Rivalry

The intensity of rivalry is high for IBM, as the company operates in a highly competitive industry with several established players. The market is characterized by frequent product innovations, aggressive pricing, and high marketing expenditures, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 71.67%
Debt Cost 3.95%
Equity Weight 28.33%
Equity Cost 7.67%
WACC 5.00%
Leverage 253.02%

11. Quality Control: International Business Machines Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Microsoft

A-Score: 6.0/10

Value: 0.5

Growth: 7.9

Quality: 8.5

Yield: 2.0

Momentum: 8.0

Volatility: 9.3

1-Year Total Return ->

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IBM

A-Score: 5.5/10

Value: 1.5

Growth: 3.0

Quality: 6.3

Yield: 6.0

Momentum: 8.0

Volatility: 8.3

1-Year Total Return ->

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Salesforce

A-Score: 5.0/10

Value: 2.2

Growth: 8.9

Quality: 8.4

Yield: 1.0

Momentum: 2.5

Volatility: 7.0

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Accenture

A-Score: 4.8/10

Value: 3.7

Growth: 5.8

Quality: 7.6

Yield: 4.4

Momentum: 1.0

Volatility: 6.7

1-Year Total Return ->

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SAP

A-Score: 4.7/10

Value: 1.1

Growth: 4.2

Quality: 8.1

Yield: 1.9

Momentum: 6.0

Volatility: 6.7

1-Year Total Return ->

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Capgemini

A-Score: 4.6/10

Value: 4.9

Growth: 6.1

Quality: 5.5

Yield: 3.8

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

307.99$

Current Price

307.99$

Potential

-0.00%

Expected Cash-Flows