IBM's Asymmetric Performance Leaves Investors Questioning Its Value

IBM's performance has been inconsistent over the past year, with the stock capturing about 83% of the S&P 500's gains on days when the index rose. However, on days when the index fell, IBM took about 102% of the loss.

This asymmetric downside capture ratio is a key metric for investors evaluating the stock's performance. Over the past five years, IBM has shown high volatility, with an annualized return of 30.3%, compared to 17.2% for the S&P 500.

The company's software segment accounts for nearly 45% of its revenue, and about 80% of that is recurring. However, the other 20% comes from large clients buying mainframe and software stack on enterprise license agreements, which were impacted by supply chain constraints in the second quarter of 2026.

Despite these challenges, IBM has returned 18.0% annualized over the past five years, outperforming the S&P 500's 12.8%. However, the stock trades about 24% below its 52-week high, raising questions about its current value.