IBM (IBM)
Information Technology · $231B market cap · SEC CIK 0000051143
ahead of 46% of the S&P 500 · #44 of 73 in Information Technology
Next reports on Jan 26, 2027, after the close, with analysts expecting $4.67 in earnings per share.
52-week range $199.19 to $332.46. 26% below its 52-week high and 23% above its low.
The case for IBM
- Earns 33% back on shareholder equity.
- Generated $12.1B of free cash flow in FY2025, 18% of revenue.
- Earnings per share up 40.2%.
- Pays a 4.3% dividend while you wait.
- Gross margin of 58% absorbs cost shocks.
- Moves less than the market (beta 0.74).
The case against
- Current liabilities exceed current assets (ratio 0.85).
- Revenue growth of +6.8% is slower than 85% of Information Technology companies.
- The price trend is weak (39/100): −19.7% over a year, +4.1% over three months, 26% below its 52-week high.
- Trailed the S&P 500 by 32 points over the past year.
What the score is made of
Each factor is half a curve over reported figures and half a rank among the other Information Technology companies (momentum is judged against fixed thresholds only), and the five are blended by weight. The score is where that blend places it in the S&P 500. It describes the last filing and the current price. It is not a forecast.
| Valuewhat you pay for the earnings and cash, against the growth you get | 64 |
|---|---|
| Growthhow fast revenue and earnings are moving, this year and over five | 41 |
| Profitabilityhow much of the revenue becomes profit, and how much of that is cash | 57 |
| Momentumhow the price has behaved lately | 39 |
| Stabilityhow violently it moves, what it owes and what it pays you | 78 |
- Each factor except momentum is half fixed thresholds, half rank among the 73 Information Technology companies.
The financials
Revenue growth
Is the business growing? Slowly
| Last 12 months | +6.8% |
|---|---|
| Over 5 years | +4.1% a year |
| FY2025 revenue | $67.5B (+8%) |
Free cash flow
Is it generating real cash? Yes, plenty
| FY2025 free cash flow | $12.1B |
|---|---|
| Of revenue | 18% |
| Of profit | 114% |
Profit margins
Is profitability improving? Yes, improving
| Gross margin | 58% |
|---|---|
| Operating margin | 15% |
| Net margin, FY24 → FY25 → now | 9.6% → 15.7% → 16.0% |
Debt vs. cash
Is the balance sheet healthy? Mostly, with some debt to carry
| Cash | $13.6B |
|---|---|
| Long-term debt | $54.8B |
| Net debt | $41.2B |
| Years to repay | 4.2 yrs |
Valuation
Is the stock price reasonable? Yes, it looks cheap
| P/E | 20.6× |
|---|---|
| Fair P/E for its growth | 26× |
| P/FCF | 19.0× |
| Forward P/E | 19.6× |
| EV / EBITDA | 23.6× |
At 20.6× earnings it trades below the 26× that 8% a year of growth plus a 4.3% dividend would justify. At 19.0× free cash flow it trades below that same mark.
The financials, five years deep
Pulled from IBM's XBRL filings on SEC EDGAR. Italic rows are worked out from the others.
| FY2025 | FY2024 | FY2023 | FY2022 | FY2021 | |
|---|---|---|---|---|---|
| Revenue growth | |||||
| Revenue | $67.5B | $62.8B | $61.9B | $60.5B | $57.4B |
| Change on the year | +8% | +1% | +2% | +6% | — |
| Free cash flow | |||||
| Free cash flow | $12.1B | $12.4B | $12.7B | $9.1B | $10.7B |
| Of revenue | 18% | 20% | 21% | 15% | 19% |
| Profit margins | |||||
| Gross margin | 58.2% | 56.7% | 55.4% | 54.0% | 54.9% |
| Net margin | 15.7% | 9.6% | 12.1% | 2.7% | 10.0% |
| Debt vs. cash | |||||
| Cash | $13.6B | $13.9B | $13.1B | $7.9B | $6.7B |
| Long-term debt | $54.8B | $49.9B | $50.1B | $46.2B | $44.9B |
| Net cash (debt) | −$41.2B | −$35.9B | −$37.1B | −$38.3B | −$38.3B |
What IBM says it does
International Business Machines Corporation (IBM or the company) was incorporated in the State of New York on June 16, 1911, as the Computing-Tabulating-Recording Co. (C-T-R), a consolidation of the Computing Scale Co. of America, the Tabulating Machine Co. and The International Time Recording Co. of New York. Since that time, IBM has focused on the intersection of business insight and technological innovation, and its operations and aims have been international in nature. This was signaled over 100 years ago, in 1924, when C-T-R changed its name to International Business Machines Corporation. And it continues today—we create sustained value for clients by helping them leverage the power of hybrid cloud and artificial intelligence (AI). Our hybrid cloud platform and AI technology support clients’ digital transformations and helps them reimagine critical workflows, at scale, and modernize applications to increase agility, drive…
Risk factors IBM lists in its 10-K
- Downturn in Economic Environment and Client Spending Budgets Could Impact the Company’s Business
- Failure of Innovation Initiatives Could Impact the Long-Term Success of the Company
- Damage to IBM’s Reputation Could Impact the Company’s Business
- Risks from Investing in Growth Opportunities Could Impact the Company’s Business
- IBM’s Intellectual Property Portfolio May Not Prevent Competitive Offerings, and IBM May Not Be Able to Obtain Necessary Licenses
- Risks to the Company from Acquisitions, Alliances and Divestitures Include Integration Challenges, Failure to Achieve Objectives, the Assumption or Retention of Liabilities and Higher Debt Levels
- The Company’s Financial Results for Particular Periods Are Difficult to Predict
- Due to the Company’s Global Presence, Its Business and Operations Could Be Impacted by Local Legal, Economic, Political, Health and Other Conditions
- The Company May Not Meet Its Growth and Productivity Objectives
- Ineffective Internal Controls Could Impact the Company’s Business and Operating Results
- The Company’s Use of Accounting Estimates Involves Judgment and Could Impact the Company’s Financial Results
- The Company’s Goodwill or Amortizable Intangible Assets May Become Impaired
- The Company Depends on Skilled Employees and Could Be Impacted by a Shortage of Critical Skills
- The Company’s Business Could Be Impacted by Its Relationships with Critical Suppliers
- Product and Service Quality Issues Could Impact the Company’s Business and Operating Results
- The Development and Use of AI, including the Company’s Increased AI Solutions and Use of AI Technologies, Could Impact the Long-Term Success of the Company and its Reputation or Give Rise to Legal or Regulatory Action
- The Company Could Be Impacted by Its Business with Government Clients
- The Company’s Reliance on Third-Party Distribution Channels and Ecosystems Could Impact Its Business
- Cybersecurity and Data Protection Considerations Could Impact the Company’s Business
- The Company Could Incur Substantial Costs Related to Climate Change and Other Environmental Matters
- The Company Is Subject to Legal Proceedings and Investigatory Risks
- The Company’s Results of Operations and Financial Condition Could Be Negatively Impacted by Its U.S. and non-U.S. Pension Plans
- The Company Is Exposed to Currency and Financing Risks That Could Impact Its Revenue and Business
- The Company’s Financial Performance Could Be Impacted by Changes in Market Liquidity Conditions and by Customer Credit Risk on Receivables