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Yahoo
24-07-2025
- Business
- Yahoo
Buy IBM Stock On 'Short-Term Weakness,' Analyst Asserts After Q2 Performance
International Business Machines (NYSE:IBM) reported strong fiscal second-quarter 2025 results, beating Wall Street expectations across all primary metrics and reaffirming its full-year guidance. The stock is trading lower after the report. In a rapidly evolving technological landscape, companies are increasingly turning to AI and hybrid cloud solutions to stay competitive, driving significant shifts in the enterprise tech sector. IBM is at the forefront of this trend, leveraging its robust software and infrastructure services to capture the growing demand for generative analyst Daniel Ives maintained an Outperform rating on IBM with a price forecast of $325 on Thursday. The analyst said the company continues to see broad-based strength in software and infrastructure services, with over 10% of total revenue now coming from generative AI. He said its GenAI book of business accelerated to $7.5 billion, up from roughly $6.0 billion in the previous quarter, signaling increased enterprise adoption of its AI offerings. Total revenue rose 8% year-over-year to $16.98 billion, exceeding the Street's estimate of $16.59 billion and the company's guidance range of $16.40 billion to $16.75 billion. Software revenue grew 10% year-over-year, Red Hat revenue increased 14% in constant currency, and annual recurring revenue (ARR) expanded to $22.70 billion, up 10% year-over-year. ARR now accounts for 45% of IBM's business. The company cited a strong start to its z17 infrastructure as a key driver, with infrastructure investments expected to yield a 3x–4x multiplier across IBM's product stack, Ives stated. Consulting revenue came in at $5.31 billion, up 3% year-over-year and flat in constant currency, narrowly topping consensus estimates of $5.16 billion. IBM added over 200 new clients to the consulting segment, and its backlog grew at a mid-single-digit pace despite a tight pricing environment. Adjusted gross margin rose to 60.1%, topping the Street's 58.4% estimate. Adjusted pre-tax income margin reached 18.8%, beating expectations of 18.1%, reflecting improved operating leverage across the business. Free cash flow rose to $2.85 billion, up from $2.61 billion a year earlier, supported by productivity initiatives and efficient cost management. IBM reaffirmed its full-year 2025 revenue guidance, projecting at least 5% growth in constant currency, including a 1.5% FX tailwind. The company raised its free cash flow guidance to more than $13.50 billion, exceeding the Street estimate, and aims to exit fiscal 2025 with ~$4.5 billion in annual run-rate savings by scaling AI internally. Management said customer buying behavior has remained stable into third-quarter, and the firm plans to continue balancing growth investments with margin expansion, Ives noted. IBM emphasized that its 'business flywheel'—the effect of cross-selling AI across software, infrastructure, and consulting—is gaining momentum, the analyst said. The company sees growing opportunity as more enterprises implement hybrid and AI-driven solutions to boost productivity, he added. Ives noted IBM is well-positioned to capitalize on structural shifts in enterprise tech, particularly the rising demand for hybrid cloud and AI applications. The analyst pointed out the company's expanding GenAI revenue and consistent execution as catalysts for long-term profitable growth. Given the strong second-quarter performance and raised outlook, he suggested buying on any short-term weakness in the stock. Price Action: IBM stock is trading lower by 7.68% to $260.34 at last check on Thursday. Photo courtesy MacroEcon via Shutterstock Latest Ratings for IBM Date Firm Action From To Jan 2022 BMO Capital Maintains Market Perform Jan 2022 UBS Downgrades Neutral Sell Jan 2022 Goldman Sachs Initiates Coverage On Neutral View More Analyst Ratings for IBM View the Latest Analyst Ratings UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? IBM (IBM): Free Stock Analysis Report This article Buy IBM Stock On 'Short-Term Weakness,' Analyst Asserts After Q2 Performance originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Sign in to access your portfolio
Yahoo
24-07-2025
- Business
- Yahoo
Buy IBM Stock On 'Short-Term Weakness,' Analyst Asserts After Q2 Performance
International Business Machines (NYSE:IBM) reported strong fiscal second-quarter 2025 results, beating Wall Street expectations across all primary metrics and reaffirming its full-year guidance. The stock is trading lower after the report. In a rapidly evolving technological landscape, companies are increasingly turning to AI and hybrid cloud solutions to stay competitive, driving significant shifts in the enterprise tech sector. IBM is at the forefront of this trend, leveraging its robust software and infrastructure services to capture the growing demand for generative analyst Daniel Ives maintained an Outperform rating on IBM with a price forecast of $325 on Thursday. The analyst said the company continues to see broad-based strength in software and infrastructure services, with over 10% of total revenue now coming from generative AI. He said its GenAI book of business accelerated to $7.5 billion, up from roughly $6.0 billion in the previous quarter, signaling increased enterprise adoption of its AI offerings. Total revenue rose 8% year-over-year to $16.98 billion, exceeding the Street's estimate of $16.59 billion and the company's guidance range of $16.40 billion to $16.75 billion. Software revenue grew 10% year-over-year, Red Hat revenue increased 14% in constant currency, and annual recurring revenue (ARR) expanded to $22.70 billion, up 10% year-over-year. ARR now accounts for 45% of IBM's business. The company cited a strong start to its z17 infrastructure as a key driver, with infrastructure investments expected to yield a 3x–4x multiplier across IBM's product stack, Ives stated. Consulting revenue came in at $5.31 billion, up 3% year-over-year and flat in constant currency, narrowly topping consensus estimates of $5.16 billion. IBM added over 200 new clients to the consulting segment, and its backlog grew at a mid-single-digit pace despite a tight pricing environment. Adjusted gross margin rose to 60.1%, topping the Street's 58.4% estimate. Adjusted pre-tax income margin reached 18.8%, beating expectations of 18.1%, reflecting improved operating leverage across the business. Free cash flow rose to $2.85 billion, up from $2.61 billion a year earlier, supported by productivity initiatives and efficient cost management. IBM reaffirmed its full-year 2025 revenue guidance, projecting at least 5% growth in constant currency, including a 1.5% FX tailwind. The company raised its free cash flow guidance to more than $13.50 billion, exceeding the Street estimate, and aims to exit fiscal 2025 with ~$4.5 billion in annual run-rate savings by scaling AI internally. Management said customer buying behavior has remained stable into third-quarter, and the firm plans to continue balancing growth investments with margin expansion, Ives noted. IBM emphasized that its 'business flywheel'—the effect of cross-selling AI across software, infrastructure, and consulting—is gaining momentum, the analyst said. The company sees growing opportunity as more enterprises implement hybrid and AI-driven solutions to boost productivity, he added. Ives noted IBM is well-positioned to capitalize on structural shifts in enterprise tech, particularly the rising demand for hybrid cloud and AI applications. The analyst pointed out the company's expanding GenAI revenue and consistent execution as catalysts for long-term profitable growth. Given the strong second-quarter performance and raised outlook, he suggested buying on any short-term weakness in the stock. Price Action: IBM stock is trading lower by 7.68% to $260.34 at last check on Thursday. Photo courtesy MacroEcon via Shutterstock Latest Ratings for IBM Date Firm Action From To Jan 2022 BMO Capital Maintains Market Perform Jan 2022 UBS Downgrades Neutral Sell Jan 2022 Goldman Sachs Initiates Coverage On Neutral View More Analyst Ratings for IBM View the Latest Analyst Ratings UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? IBM (IBM): Free Stock Analysis Report This article Buy IBM Stock On 'Short-Term Weakness,' Analyst Asserts After Q2 Performance originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved.
