| Factor | Score | Distribution | Value | Avg | Rank |
|---|---|---|---|---|---|
Valuation | 44 | 21.6x | 17.3x | Around median | |
Growth | 54 | 6.8% | 7.1% | Around median | |
Quality | 93 | 13.5% | 4.5% | Top tier | |
Safety | 58 | 2.6x | 2.6x | Around median | |
Capital Return | 63 | 2.65% | 0.06% | Around median | |
Momentum | 56 | -21.0% | -1.6% | Around median | |
Sentiment | 71 | 14 | 3 | Top tier |
The floor: what the company is worth if growth stopped today
62% of today's price is what a buyer pays for growth that has not happened yet.
10-year US Treasury yield 4.96% as of 2026-10-22. Estimates computed from company data and analyst targets, not investment advice.
Ten ratios that matter, each compared against its sector median and average — so you can see whether a number is rich or cheap relative to peers in the same sector.
International Business Machines Corporation operates through a mix of software, infrastructure, and consulting services, with a focus on hybrid cloud, artificial intelligence, data, automation, and mission-critical transaction processing. Software accounted for approximately 45% of total revenue in Q2 FY2026, and about 80% of annual software revenue was recurring through subscriptions, consumption, and support, while the remainder was primarily tied to licenses and enterprise agreements associated with mainframes. IBM connects Red Hat, OpenShift, watsonx Orchestrate, Confluent, and the IBM Z platform to run applications, data, and AI agents across clouds and on-premises infrastructure.
In Q2 FY2026, IBM reported revenue of $17.2 billion, gross profit of $9.9 billion, net income of $2.2 billion, and earnings per share of $2.27, equivalent to a calculated gross margin of approximately 57.6% and a net income margin of approximately 12.8%. According to the earnings call metrics, total revenue grew 1%, diluted operating earnings per share increased 5%, and the operating pre-tax margin expanded by 30 basis points, but the operating gross margin declined by 70 basis points due to the revenue shortfall and business mix.
Segment performance varied in Q2 FY2026: software revenue grew 5%, with organic growth remaining flat, consulting grew 1% and its signings increased 6%, while infrastructure revenue declined 7%. Within software, data grew 18% and automation grew 3%, while transaction processing software declined 9% due to delays in dozens of large deals; meanwhile, Red Hat growth accelerated to 11%, and software annual recurring revenue reached $24.6 billion, up 8% from the prior year.
The average analyst price target is $255.92 with a Buy consensus, but it conceals a wide dispersion between a low target of $175 and a high target of $350. The average is below the 52-week high of $332.46, while the high target exceeds that peak and the low target falls below the 52-week low of $199.19; this breadth reflects fundamental disagreement over IBM's ability to restore software growth and accelerate revenue following the Q2 FY2026 setback. The provided data did not include a usable price-to-earnings ratio, so the valuation here is based solely on the target range and the 52-week range.
Figures in the text are as of 2026-08-26; the live price is shown at the top of the page.
IBM generated revenue of $17.2 billion, net income of $2.2 billion, and earnings per share of $2.27 in Q2 FY2026. Revenue grew 1%, diluted operating earnings per share increased 5%, and the operating pre-tax margin expanded by 30 basis points. However, dozens of large deals did not close on schedule after customers shifted capital spending toward servers, storage, and memory, causing most of the estimated $400–500 million software shortfall.
Generative AI accounted for approximately 50% of consulting signings in Q2 FY2026 and more than 30% of the segment's backlog. IBM uses products such as watsonx Orchestrate, Red Hat, and Confluent to orchestrate agents and data across clouds and on-premises infrastructure. On August 13, 2026, the company announced a partnership with OpenAI and a specialized practice comprising thousands of certified consultants and engineers to support enterprise AI deployment.
Yes, the z17 cycle reached approximately 130% compared with the previous cycle, despite a 42% decline in mainframe revenue in Q2 FY2026 compared with a strong launch quarter in the prior year. IBM Z processes more than 70% of the value of global transaction volumes, and more than 140 million MIPS are installed, of which 85% were stable or growing. Approximately 50% of z17 customers also invested in AI capabilities, and users of watsonx Code Assistant for Z were increasing MIPS capacity at three times the rate of non-users.
Automated analysis for informational purposes only — not investment advice.
IBM expects FY2026 revenue growth of 4%–5% and software growth of 6%–8%. It expects low-single-digit growth in infrastructure and an acceleration in consulting to the low- or mid-single-digit range. The company also maintained its target of increasing free cash flow by approximately $1 billion and expects a 100-basis-point expansion in the operating pre-tax margin.
IBM launched the Lightwell service with a subscription price of $1 million annually to protect open-source software and delivered more than 7,500 package releases during the first two weeks of availability. Management estimated the market opportunity at billions of dollars, with early adopters including Bank of America, Citi, Mastercard, and Visa. On August 26, 2026, IBM announced the completion of its acquisition of HRL Laboratories to combine its expertise in silicon qubits, sensing, and materials science with its quantum computing program.
The first risk is continued delays in large software deals after transaction processing declined 9% in Q2 FY2026 and organic software growth remained flat. The second risk is infrastructure weakness, as segment revenue declined 7% and its margin fell by 150 basis points, alongside a $600 million year-over-year increase in inventory to secure supplies. Debt of $62 billion and higher net interest expense also add financial sensitivity, while the wide range of analyst targets between $175 and $350 reveals significant valuation uncertainty.