IBM Receives Buy Rating and $310 PT from BofA on AI and Software Momentum

IBM has received a "Buy" rating and $310 price target from Bank of America due to its transition towards higher-margin software and strong growth in free cash flow. The firm expects future prospects to be promising despite volatility in transaction processing revenue. IBM has introduced new technologies, such as the z17 mainframe and AI acceleration through Spyre cards, which are expected to boost transaction processing growth.

International Business Machines (IBM) stock experienced a significant drop following its second-quarter earnings report, but analysts remain bullish on the company's long-term prospects. The stock tumbled more than 7% on July 24, 2025, after reporting revenue of $17 billion, which exceeded Wall Street expectations of $16.6 billion. Adjusted earnings per share stood at $2.80, surpassing estimates of $2.64 [1].

Analysts from various firms, including Melius Research, Wedbush, and Bank of America, have given IBM a "Buy" rating and price targets ranging from $310 to $325. These analysts view the recent decline in stock price as an overreaction to the company's earnings results. They highlight IBM's strong positioning in the mainframe cycle and its growing software business, led by Red Hat's 16% growth acceleration in the quarter [1].

Bank of America analysts specifically noted IBM's transition towards higher-margin software and its strong growth in free cash flow. They expect future prospects to be promising despite volatility in transaction processing revenue. The firm expects IBM's free cash flow to improve from $12.75 billion in 2024 to $18.21 billion in 2029, with an estimated annual FCF growth rate of 7.4% [1].

IBM has introduced new technologies, such as the z17 mainframe and AI acceleration through Spyre cards, which are expected to boost transaction processing growth. The company's consulting business, while facing near-term headwinds, showed encouraging signs with a healthy $32 billion backlog. CEO Arvind Krishna expressed optimism about the macroeconomic environment and strong global technology adoption [1].

The analysts' bullish stance reflects confidence in IBM's portfolio strength, mainframe cycle momentum, and accelerating AI adoption among enterprise clients. They view IBM as a "show me story" on software performance in the second half while remaining bullish on the overall company trajectory [1].

References:
[1] https://finance.yahoo.com/news/analysts-want-buy-dip-ibm-110002157.html