Bank of America Downgrades IBM to $310 Target, But Maintains 'Buy' Rating

IBM's Q2 earnings beat estimates, with adjusted EPS at $2.80 and revenue at $16.98 billion. Bank of America reiterated IBM as a "Buy" but lowered the target to $310 from $320. The firm believes IBM is well-positioned for growth and expects estimates to move higher this year and next.

IBM reported its second-quarter 2025 earnings, with adjusted earnings per share (EPS) at $2.80, surpassing the expected $2.64, and revenue at $16.98 billion, exceeding the anticipated $16.59 billion [1]. Despite this strong performance, IBM shares fell as much as 6% in extended trading due to the software revenue falling short of expectations [2].

Software revenue increased by approximately 10% to $7.39 billion, narrowly missing the $7.43 billion consensus among analysts [1]. This underperformance was attributed to geopolitical tensions and cautious spending by clients [2]. CEO Arvind Krishna noted that while geopolitical tensions and constrained US federal spending had an impact, they do not foresee long-term headwinds [1].

IBM's revenue growth was driven by strong performance in consulting and infrastructure segments, with consulting revenue rising by almost 3% to $5.31 billion and infrastructure revenue increasing by 14% to $4.14 billion [1]. The company also announced the launch of the next-generation z17 mainframe computer and the acquisition of data and artificial intelligence consulting firm Hakkoda [1].

Bank of America reiterated its "Buy" rating on IBM but lowered its price target to $310 from $320, citing the company's strong position in hybrid and AI applications and expectations for higher estimates this year and next [3]. Despite the concerns about slowing software growth, the firm remains bullish on IBM's overall trajectory.

IBM's generative artificial intelligence book of business has grown to $7.5 billion, up from $6 billion in April, and the company maintains its 2025 guidance of over $13.5 billion in free cash flow and at least 5% revenue growth at constant currency [1].

References:
[1] https://www.cnbc.com/2025/07/23/ibm-q2-earnings-report-2025.html
[2] https://www.shacknews.com/article/145240/ibm-q2-2025-earnings-results-beat-expectations
[3] https://finance.yahoo.com/news/ibm-stock-slips-slowing-software-142551643.html