IBM’s AI Ambitions Gain Momentum with Strong Quarterly Results

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IBM, once perceived as a slow-moving legacy technology firm, appears to have turned a significant corner. The company's latest quarterly report, released on January 28, delivered not only robust financial figures but also compelling evidence that its strategic pivot to become a major force in artificial intelligence is yielding tangible results. A burgeoning order book for AI services and unexpected strength in its infrastructure division signal a successful corporate repositioning.

The technology giant reported fourth-quarter revenue of $19.7 billion, marking a 12% year-over-year increase. More notably, adjusted earnings per share came in at $4.52, decisively surpassing the consensus analyst estimate of $4.32. This fundamental outperformance could provide fresh impetus for IBM's shares, which have declined approximately 11% since the start of the year.

AI and Hybrid Cloud Drive Demand

Central to the company's recent success is soaring demand for generative AI capabilities. IBM's backlog of AI-related business has now expanded to over $12.5 billion. This milestone indicates that enterprise clients are increasingly embedding IBM's "watsonx" AI and data platform, along with its hybrid cloud solutions, into their core operational workflows.

Legacy Hardware Experiences a Resurgence

Beyond its software and consulting segments, IBM witnessed a powerful resurgence in its traditional hardware business. The infrastructure unit posted a remarkable 21% revenue surge. This growth was fueled primarily by the current product cycle for IBM Z mainframe systems, with revenue from these high-end servers skyrocketing by 67%.

This operational strength is translating directly into financial flexibility. The company's full-year free cash flow reached $14.7 billion, an increase of roughly $2 billion compared to the prior year. Management highlighted this liquidity as a critical enabler for future strategic investments and shareholder returns.

Key Financial Data at a Glance

• Q4 2025 Revenue: $19.7 billion (+12% year-over-year)
• Adjusted Earnings Per Share: $4.52 (above expectations)
• AI Order Backlog: > $12.5 billion
• Dividend: $1.68 per share (payable March 10, 2026)

Wall Street Responds with Upgraded Targets

The financial community reacted favorably to the earnings release. A number of equity research firms raised their price targets on IBM stock, citing renewed momentum in software and AI. Analysts at Jefferies now see the shares reaching $370. Both Evercore ISI ($345) and Wedbush ($340) also lifted their forecasts. Bank of America had previously emphasized the potential for expanding profit margins at the company.

Guidance and Capital Management

Looking ahead to the full 2026 fiscal year, IBM's leadership expressed continued optimism. The company is forecasting currency-adjusted revenue growth exceeding 5% and anticipates growing free cash flow by an additional $1 billion. Investors can also expect the next quarterly dividend payment of $1.68 per share on March 10. Furthermore, IBM optimized its capital structure through a bond issuance completed on January 29.

@ boerse-global.de | US4592001014 IBM’S