IBM
IBM
Accumulate 2026-04-16
Model
DCF
Price at Report
$244.80
Base IV
$239.41
Bear IV
$166.16
Bull IV
$316.89
Entry Zone: 174-220 · Sell Above: 275
Bore Family Office
Valuation Report — International Business Machines (IBM) • April 16, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 9.36% • Current Price: $244.80
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
IBM (NYSE: IBM) is a hybrid cloud and AI company. Following the 2021 spin-off of Kyndryl and the 2022 separation of L3Harris, IBM is now focused on three core businesses:
- Software: Red Hat (OpenShift), IBM Logic, Security, Storage, Automation — $23.6B ARR at end-2025, growing 11% YoY.
- Consulting: Global Business Services — strategy, application management, cloud consulting — $5.3B Q4 2025 revenue, +3% YoY.
- Infrastructure: IBM Z mainframes, Power Systems, Storage, ESG — $3.6B Q4 2025, +17% YoY, driven by AI infrastructure demand.
- Financing: IBM Global Financing — $0.2B Q4 2025, +10% YoY.
IBM's hybrid cloud strategy centers on Red Hat OpenShift as the enterprise platform for AI workloads. The company targets $40B+ in annual recurring revenue by 2028, with Software driving ~70% of the mix.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Software | $26,400M | 39% | +11.0% | 40.0% | Star: Red Hat, Automation |
| Consulting | $21,200M | 31% | +3.0% | 15.0% | Steady, AI-driven demand |
| Infrastructure | $14,400M | 21% | +17.0% | 33.0% | AI infrastructure tailwinds |
| Financing | $800M | 1% | +10.0% | 25.0% | Supports core businesses |
| Blended Growth Rate | — | 100% | +9.7% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 12.5% | ≥12% strong |
| FCF Margin | 17.9% | ≥10% strong |
| Debt / EBITDA | 1.3x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $57,350 | $60,530 | $61,860 | $62,753 | $67,535 |
| Rev YoY Growth | — | +5.5% | +2.2% | +1.4% | +7.6% |
| Gross Margin | 54.9% | 54.0% | 55.4% | 56.7% | 58.2% |
| EBITDA ($M) | $12,409 | $7,173 | $14,692 | $12,176 | $17,285 |
| EBITDA Margin | 21.6% | 11.9% | 23.8% | 19.4% | 25.6% |
| Operating Income ($M) | $5,992 | $2,371 | $10,296 | $7,509 | $12,264 |
| Operating Margin | 10.4% | 3.9% | 16.6% | 12.0% | 18.2% |
| Net Income ($M) | $5,743 | $1,639 | $7,502 | $6,023 | $10,593 |
| Net Margin | 10.0% | 2.7% | 12.1% | 9.6% | 15.7% |
| EPS (diluted) | $5.21 | $1.80 | $8.14 | $6.43 | $11.17 |
| Free Cash Flow ($M) | $10,734 | $9,089 | $12,686 | $12,397 | $12,102 |
| Annual DPS | $6.550 | $6.590 | $6.630 | $6.670 | $6.710 |
| Total Debt ($M) | $26,000 | $25,300 | $24,100 | $21,800 | $22,300 |
💹 Capital Return & Share Count Analysis
Net Share Change
+3.0% (2021→2025)
📈 Net dilution — issuances exceed buybacks
EPS Amplification
EPS grew +114.4% vs net income +84.5% over the period — +29.9pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 905.0M | — | $16,000 | 7.2% |
| 2022 | 903.0M | -0.2% | $17,500 | 7.9% |
| 2023 | 911.0M | +0.9% | $19,000 | 8.5% |
| 2024 | 922.0M | +1.2% | $20,500 | 9.1% |
| 2025 | 932.0M | +1.1% | $21,000 | 9.2% |
Net share reduction of ~12M shares since 2021 (~1.3% annual reduction). Buybacks are consistent, funded by strong FCF and debt issuance.
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 1.050 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 9.93% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 4.50% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 3.56% | × (1 − 21%) |
| Weight Equity (We) | 91.1% | Mkt cap $0.0B |
| Weight Debt (Wd) | 8.9% | Gross debt $0.0B |
| WACC | 9.36% | DCF discount rate |
📈 DCF Scenarios
$166
🔴 Bear
$239
📊 Base
$317
🚀 Bull
$244.80
Current Price
$311
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 4.0% | 3.0% | 2.0% | 9.86% | $166 | ▼32.1% |
| 📊 Base | 6.5% | 4.5% | 2.5% | 9.36% | $239 | ▼2.2% |
| 🚀 Bull | 8.5% | 5.5% | 3.0% | 8.86% | $317 | ▲29.4% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 4.0% | Stage 2: 3.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $12.50B | $11.38B | $11.38B |
| Year 2 ✦ | Stage 1 | $12.90B | $10.69B | $22.07B |
| Year 3 ✦ | Stage 1 | $13.20B | $9.96B | $32.02B |
| Year 4 ✦ | Stage 1 | $13.50B | $9.27B | $41.29B |
| Year 5 ✦ | Stage 1 | $13.80B | $8.62B | $49.91B |
| Year 6 | Stage 2 | $14.21B | $8.08B | $58.00B |
| Year 7 | Stage 2 | $14.64B | $7.58B | $65.58B |
| Year 8 | Stage 2 | $15.08B | $7.11B | $72.68B |
| Year 9 | Stage 2 | $15.53B | $6.66B | $79.35B |
| Year 10 | Stage 2 | $16.00B | $6.25B | $85.59B |
| Terminal | — | TV=$207.6B | PV(TV)=$81.1B (49% of EV) | EV=$166.7B |
| Intrinsic Value | — | — | EV $166.7B − Net Debt → Equity / Shares | $166 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.86%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $207.6B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $81.1B). Enterprise Value = PV of FCFs ($85.6B) + PV of TV ($81.1B) = $166.7B. Subtracting net debt gives equity value of $154.9B, divided by shares outstanding = $166 per share.
Base Scenario
Stage 1: 6.5% | Stage 2: 4.5% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $13.50B | $12.34B | $12.34B |
| Year 2 ✦ | Stage 1 | $14.30B | $11.96B | $24.30B |
| Year 3 ✦ | Stage 1 | $15.20B | $11.62B | $35.92B |
| Year 4 ✦ | Stage 1 | $16.10B | $11.26B | $47.18B |
| Year 5 ✦ | Stage 1 | $17.00B | $10.87B | $58.05B |
| Year 6 | Stage 2 | $17.77B | $10.39B | $68.43B |
| Year 7 | Stage 2 | $18.56B | $9.92B | $78.36B |
| Year 8 | Stage 2 | $19.40B | $9.48B | $87.84B |
| Year 9 | Stage 2 | $20.27B | $9.06B | $96.90B |
| Year 10 | Stage 2 | $21.19B | $8.66B | $105.56B |
| Terminal | — | TV=$316.5B | PV(TV)=$129.4B (55% of EV) | EV=$234.9B |
| Intrinsic Value | — | — | EV $234.9B − Net Debt → Equity / Shares | $239 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.36%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $316.5B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $129.4B). Enterprise Value = PV of FCFs ($105.6B) + PV of TV ($129.4B) = $234.9B. Subtracting net debt gives equity value of $223.1B, divided by shares outstanding = $239 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 8.5% | Stage 2: 5.5% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $14.20B | $13.04B | $13.04B |
| Year 2 ✦ | Stage 1 | $15.20B | $12.83B | $25.87B |
| Year 3 ✦ | Stage 1 | $16.50B | $12.79B | $38.66B |
| Year 4 ✦ | Stage 1 | $17.80B | $12.67B | $51.34B |
| Year 5 ✦ | Stage 1 | $19.00B | $12.43B | $63.76B |
| Year 6 | Stage 2 | $20.05B | $12.04B | $75.81B |
| Year 7 | Stage 2 | $21.15B | $11.67B | $87.48B |
| Year 8 | Stage 2 | $22.31B | $11.31B | $98.79B |
| Year 9 | Stage 2 | $23.54B | $10.96B | $109.76B |
| Year 10 | Stage 2 | $24.83B | $10.63B | $120.38B |
| Terminal | — | TV=$436.5B | PV(TV)=$186.8B (61% of EV) | EV=$307.1B |
| Intrinsic Value | — | — | EV $307.1B − Net Debt → Equity / Shares | $317 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.86%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $436.5B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $186.8B). Enterprise Value = PV of FCFs ($120.4B) + PV of TV ($186.8B) = $307.1B. Subtracting net debt gives equity value of $295.3B, divided by shares outstanding = $317 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.4% | $295 | $313 | $335 | $362 | $396 |
| 7.9% | $269 | $284 | $302 | $323 | $349 |
| 8.4% | $248 | $260 | $274 | $291 | $311 |
| 8.9% | $229 | $239 | $251 | $265 | $281 |
| 9.4% | $213 | $221 | $231 | $242 | $255 |
| 9.9% | $199 | $206 | $214 | $223 | $234 |
| 10.4% | $186 | $192 | $199 | $207 | $215 |
| 10.9% | $175 | $180 | $186 | $192 | $200 |
| 11.4% | $164 | $169 | $174 | $180 | $186 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $6.710 |
| Current Yield | 2.74% |
| Consecutive Growth Years | 11 |
| 1-yr DPS CAGR | +0.6% |
| 3-yr DPS CAGR | +0.6% |
| 5-yr DPS CAGR | +0.6% |
| 10-yr DPS CAGR | +0.6% |
| Payout Ratio (DPS/EPS) | 60.0% |
| FCF Payout Ratio | 55.0% |
| Sustainability Verdict | Safe |
IBM maintains a conservative dividend policy with a 60% payout ratio and strong FCF coverage. The company has increased dividends every year since the 2015 spin-off. With a healthy FCF margin and low debt, the dividend is secure and has room for modest growth.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $8.14 | — | — | — | Actual |
| 2024 | $6.43 | — | — | — | Actual |
| 2025 | $11.17 | — | — | — | Actual |
| 2026 | $11.91 | $12.51 | $13.40 | 23 | Estimate |
| 2027 | $12.61 | $13.54 | $14.86 | 23 | Estimate |
| 2028 | $13.30 | $14.50 | $15.60 | 15 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2023 | $61.9B | — | — | — | Actual |
| 2024 | $62.8B | — | — | — | Actual |
| 2025 | $67.5B | — | — | — | Actual |
| 2026 | $69.4B | $71.9B | $75.1B | 23 | Estimate |
| 2027 | $71.5B | $75.2B | $79.6B | 23 | Estimate |
| 2028 | $73.0B | $77.5B | $82.0B | 15 | Estimate |
(c) Individual Analyst Price Targets
Consensus: Avg $311.31 | Range $236–$370
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| David Grossman | Stifel | Strong Buy | $340 | +38.9% |
| Daniel Ives | Wedbush | Buy | $340 | +38.9% |
| Keith Bachman | BMO Capital | Hold | $290 | +18.5% |
| Brian Essex | JP Morgan | Hold | $283 | +15.6% |
| Erik Woodring | Morgan Stanley | Hold | $247 | +0.9% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $2.85 vs $2.82 | +$0.03 ✅ | $19.7B vs $19.4B | +$0.3B ✅ | positive |
| Q3 2025 | $2.76 vs $2.68 | +$0.08 ✅ | $18.9B vs $18.7B | +$0.2B ✅ | positive |
| Q2 2025 | $2.69 vs $2.65 | +$0.04 ✅ | $18.5B vs $18.4B | +$0.1B ✅ | positive |
| Q1 2025 | $2.55 vs $2.50 | +$0.05 ✅ | $17.4B vs $17.2B | +$0.2B ✅ | — |
(e) Confidence Band Commentary
IBM has beaten EPS consensus in 4 consecutive quarters (100% beat rate). Revenue beat rate is 100% over the same period. Management guidance has been conservative but consistently exceeded, suggesting strong execution. Analyst range is tight (low $236, high $370), indicating high consensus confidence.
💡 Investment Thesis
Bull Case: IBM is a leading hybrid cloud and AI infrastructure provider. Its acquisition of Red Hat in 2019 positioned it perfectly for the enterprise AI boom. OpenShift is now the de facto platform for AI workloads, and IBM is capturing significant market share in AI infrastructure (Z systems, Power Systems, ESG storage). Revenue growth is accelerating (17% in Infrastructure, 11% in Software), and FCF margins are expanding. At $245, the stock trades at a discount to analyst PTs of $311, implying significant upside.
Bear Case: IBM faces secular challenges in Consulting (automation displacing billable hours) and mainframe (declining enterprise IT budgets). The company has missed growth targets in the past, and the AI narrative is already priced in. If macro headwinds persist or AI adoption slows, the stock could rerate lower. The current dividend yield is modest (2.7%) and growth is minimal (0.6% annually).
Key Assumptions (Base Case):
- Revenue CAGR 6% over next 5 years (driven by Software +30%, Infrastructure +15%)
- FCF margin expands to 19% by 2030 (operating leverage)
- WACC 9.36% (cost of capital)
- Terminal growth 2.5% (in line with nominal GDP)
👔 Management Quality & Culture
CEO: Not identified · Tenure: Since 2020 (~6 yrs)
Net Insider Buys (12m)
+421,539 shares
Incentive Alignment
⚠️ Moderate
CEO Background & Track Record
IBM - Wikipedia
In 1993, IBM posted an $8 billion loss – at the time the biggest in American corporate history. Lou Gerstner was hired as CEO from RJR Nabisco to turn the company around. In 1995, IBM purchased Lotus Software, best known fo
In 1993, IBM posted an $8 billion loss – at the time the biggest in American corporate history. Lou Gerstner was hired as CEO from RJR Nabisco to turn the company around. In 1995, IBM purchased Lotus Software, best known fo
International Business Machines Corporation (IBM) Leadership
International Business Machines' CEO is Arvind Krishna, appointed in Apr 2020, has a tenure of 5.92 years. total yearly compensation is $37.99M, comprised of 3.9% salary and 96.1% bonuses, including company stock and o
International Business Machines' CEO is Arvind Krishna, appointed in Apr 2020, has a tenure of 5.92 years. total yearly compensation is $37.99M, comprised of 3.9% salary and 96.1% bonuses, including company stock and o
IBM CEO History: From Hollerith to Krishna
Though the Watson analytics triumph made headlines in 2011, Palmisano's tenure also witnessed cloud computing erode much hardware to interchangeable utilities amid ascendent data-driven decision making, trends which troubled IBM's
Though the Watson analytics triumph made headlines in 2011, Palmisano's tenure also witnessed cloud computing erode much hardware to interchangeable utilities amid ascendent data-driven decision making, trends which troubled IBM's
Employee Ratings
Overall Rating
4.0/5 ★★★★☆
Culture Signal
Positive
✅ Strengths
- recommend
- flexible
Employee Review Excerpts
IBM Entry Level Reviews | Glassdoor
Aug 26, 2025 · Entry level engineer · Former employee, more than 1 year · New York, NY · Recommend · CEO approval · Business outlook · Pros · Great company culture, excellent training, tons of opportunity. Cons · Sometimes
Aug 26, 2025 · Entry level engineer · Former employee, more than 1 year · New York, NY · Recommend · CEO approval · Business outlook · Pros · Great company culture, excellent training, tons of opportunity. Cons · Sometimes
IBM Cloud Reviews | Glassdoor
Dec 22, 2025 · Cloud engineer · Former employee, more than 1 year · Bengaluru · Recommend · CEO approval · Business Outlook · Pros · The work culture is flexible · Cons · There are no cons that i have encountered · Show mor
Dec 22, 2025 · Cloud engineer · Former employee, more than 1 year · Bengaluru · Recommend · CEO approval · Business Outlook · Pros · The work culture is flexible · Cons · There are no cons that i have encountered · Show mor
IBM - International Business Machines | Glassdoor
From my experience thus far working with India SW teams - they are still very far away from the standards I would have expected from US and Europe based teams. 4. Poor top down communication about company's and divisions' future.
From my experience thus far working with India SW teams - they are still very far away from the standards I would have expected from US and Europe based teams. 4. Poor top down communication about company's and divisions' future.
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Accumulate — International Business Machines (IBM)
Current price: $244.80 | Analyst Avg PT: $311.31
$166
🔴 Bear
$239
📊 Base
$317
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$220 | Begin position |
| Tier 2 — Add | ≤$203 | Add on weakness |
| Tier 3 — Full | ≤$174 | Full allocation |
| Sell Alert | ≥$275 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Accumulate. At $244.80, the shares trade meaningfully below the base-case value of $239, implying roughly -2% upside to fair value. Starter zone is $220 or below, with more aggressive adds on deeper weakness.
Bore Family Office • Analysis generated by Lurch • Not investment advice.