IBM's Dinosaur Age Fears Overblown as Core Business Roars Ahead

IBM's latest quarterly results may have been disappointing, but the company's underlying software growth and cash generation remain robust. The Hybrid Cloud and Data segments delivered double-digit growth, positioning IBM for evolving enterprise IT and AI-driven demand.

The mainframe business, however, was a weak spot in Q2, contributing to revenue pressure. Despite this, management expects 2026 free cash flow to rise by approximately $1 billion, supporting a Buy rating despite trimmed revenue guidance.

An analyst's DCF assigns a fair value of $241 per share, with sensitivity analysis indicating attractive risk/reward under conservative assumptions.