IBM Stock Jumps 6% After Earnings Beat as Investors Eye AI

International Business Machines’ stock (IBM) shares traded around $312.42 as of writing, up 6.21% during regular trading hours after a sharp premarket rally. The move followed quarterly earnings that exceeded expectations and renewed focus on IBM’s long-term growth path. 

The stock opened strong after climbing nearly 8% before the bell. Can the momentum last once early enthusiasm fades?

Earnings Beat Fuels Early Buying

IBM reported fourth-quarter revenue of $19.7 billion, beating analyst forecasts. Software revenue climbed 14%, while infrastructure revenue rose 21%. Demand for the IBM Z mainframe platform drove a 67% surge in that segment. The company also posted stronger profitability metrics, reinforcing confidence during a mixed period for technology stocks.

For full-year 2025, IBM delivered 6% revenue growth, the strongest pace in many years. Fourth-quarter revenue growth reached 9%, marking the fastest quarterly expansion in more than three years. These figures arrived as investors showed growing sensitivity to earnings quality rather than broad sector trends.

Free Cash Flow and Margins Stand Out

IBM generated $14.7 billion in free cash flow during 2025, its highest level in over a decade. Operating pretax margins expanded by 100 basis points, while adjusted EBITDA rose 17% year over year. Software now accounts for about 45% of IBM’s business, up sharply from 2018, and recorded its highest annual growth rate in company history at 9%.

The company ended 2025 with $14.5 billion in cash and returned $6.3 billion to shareholders through dividends. IBM also confirmed its quarterly dividend of $1.68, payable March 10 to shareholders on record as of Feb. 10.

AI Metrics Raise Fresh Questions

IBM disclosed that its cumulative generative AI book of business reached $12.5 billion. That figure includes software transactions, SaaS contract value, and consulting deals tied to specific AI offerings. However, the company plans to stop reporting that metric separately starting next quarter.

This shift places more emphasis on segment-level data and executive commentary. Investors now ask whether AI demand continues to broaden or remains concentrated in select areas. Transparency matters more when expectations run high, doesn’t it?

Red Hat Growth Cools

Red Hat growth slowed to around 8%–10%, depending on the period measured. CFO Jim Kavanaugh linked part of the slowdown to the late-2025 US government shutdown, which reduced federal deal activity. Government clients account for about 15% of hybrid cloud bookings. Kavanaugh also warned that renewed shutdown risks could disrupt near-term performance.

Consulting revenue grew just 1% in the fourth quarter, showing softer momentum compared with software and infrastructure.

2026 Outlook Guides the Debate

IBM expects constant-currency revenue growth above 5% in 2026 and about $1 billion in free cash flow growth year over year. CEO Arvind Krishna said the company enters 2026 with momentum. At the same time, IBM flagged around $600 million in earnings dilution tied to its planned $11 billion Confluent acquisition.

Infrastructure revenue may decline at a low single-digit rate next year due to product cycle timing. Higher cash taxes, capital spending, and interest expenses could also pressure free cash flow.

What Traders Watch Next

Analysts highlighted IBM’s defensive enterprise software profile, with Stifel reiterating a $325 price target. Still, the central question remains clear. Will IBM hold most of its gains as volume builds through the session, or will investors reassess after the opening surge?

According to Coincodex predictions, the price of International Business Machines is forecasted to hit $ 329.47 by the end of 2026 (+6.73% compared to current rates), and $ 720.15 by the end of 2030 (+133.29%).

With earnings delivered and guidance set, IBM now trades at a crossroads between confidence and caution.