IBM Stock Seen as Defensive Play With AI Tailwinds and FX Boosts

International Business Machines Corporation (NYSE:IBM) is one of the AI Stocks on Analysts’ Radar Right Now. On July 21, BofA Securities analyst Wamsi Mohan reiterated a “Buy” rating and a $320.00 price target on the stock.

The firm sees a “tough near-term setup given YTD outperformance but structural LT tailwinds.” It believes Red Hat (RHT) will grow faster, and that foreign exchange tailwinds may also be present. However, there may be weaknesses in IBM’s consultancy business, similar to those of its peers.

“IBM reports F2Q25 earnings on July 23rd, and we believe investors expect an acceleration in RHT, potential FX tailwinds, and for Consulting to be weak (similar to peers). While the tactical setup is a bit challenging given decelerating trends in parts of the business, we reiterate our Buy rating as we continue to view IBM as a defensive investment with improving revenue growth, which in turn can drive higher cash flows that could be re-invested for more M&A. We expect IBM to largely maintain its overall guide for the year but with slightly lower Transaction processing (TP) and slightly better RHT.”

Credit: IBM

Investors likely to focus on organic growth trends:

While RHT would accelerate slightly and remains an important part of the bull case on IBM, we expect TP to modestly decelerate and overall software growth (ex-Hashicorp contribution of ~$200mn) to decelerate on an organic cc basis from 9% in 1Q to 6% in 2Q and model modest acceleration into 3Q.

While bears could argue such a deceleration would continue into the future, we view the TP deceleration as not structural and expect IBM to benefit from share gains in RHT from VMware. We expect 2Q25 reported growth of 4.7%, cc growth of 2.3%, organic cc growth of 1% and organic cc less Infrastructure (Mainframe+, Power -) contribution of 0.7%. We view growth in 2Q as not indicative of the trajectory for the rest of the year especially with TP and RHT reacceleration.”

International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.

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Disclosure: None.