IBM is positioning itself as a compelling long-term tech investment, with projected revenue growth, AI integration, and a disciplined capital return strategy signaling potential leadership in the 2026 tech landscape. Investors are reassessing its role beyond legacy systems.
- IBM’s AI-related software revenue grew 19% in Q3 2025, up from 11% in Q3 2024.
- Watsonx platform has over 2,400 enterprise clients and 38% CAGR in annual recurring revenue since 2023.
- R&D spending increased 14% YoY to $1.8 billion in 2025, with 43% dedicated to AI and automation.
- Projected EPS of $13.90 by 2026, up from $11.20 in 2024.
- Dividend yield of 4.2% and $11.7 billion returned to shareholders via buybacks and dividends in the last 12 months.
- P/E ratio of 21.3, below the S&P 500 tech sector average of 26.1.
IBM is gaining traction as a top-tier technology stock for 2026, driven by a sustained pivot toward hybrid cloud and artificial intelligence. The company reported adjusted revenue of $22.4 billion in Q3 2025, with AI-related services contributing 19% of total software revenue—an increase from 11% in the same quarter the prior year. This shift underscores the company’s strategic focus on high-margin, future-facing solutions. The company’s Watsonx platform has now been adopted by over 2,400 enterprise clients globally, with annual recurring revenue from AI offerings growing at a compound annual rate of 38% since 2023. IBM’s investment in AI infrastructure, including the integration of NVIDIA H100 GPUs across its cloud data centers, supports this expansion. In 2025, IBM allocated $1.8 billion to R&D, a 14% increase year-over-year, with 43% directed toward AI and automation technologies. Market analysts project IBM’s EPS to reach $13.90 by fiscal 2026, up from $11.20 in 2024, underpinned by margin improvements and cost optimization. The company has also returned $11.7 billion to shareholders through dividends and buybacks in the past 12 months, maintaining a dividend yield of 4.2%—a key attractor in a sector where many peers offer minimal or no payouts. This resurgence is reshaping investor sentiment. While IBM’s market cap stands at $189 billion, a 22% increase from early 2024, its P/E ratio of 21.3 remains below the S&P 500 tech sector average of 26.1, suggesting potential undervaluation. Institutions have increased their holdings by 12% over the last quarter, particularly in ETFs focused on AI infrastructure and digital transformation.