Why Stifel Says International Business Machines (IBM) Remains a Top Large-Cap Defensive AI Stock

International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Making Waves on Wall StreetOn January 29, Stifel analyst David Grossman raised the price target on the stock to $340 from $325 while maintaining a Buy rating. IBM remains top large-cap defensive pick, with analysts highlighting its FCF beat, robust software growth, and 2026 PTI guide.

IBM’s fourth-quarter 2025 were in-line or slightly above consensus expectations, with 7% organic revenue growth and 15% earnings per share growth. The firm noted that adjusting for the planned inclusion of Confluent, anticipated to close in mid-2026, the company’s 2026 revenue/margin guidance was largely inline with software growth and assumed to accelerate as year progresses.

Stifel noted that the key surprise in the quarter was IBM’s $0.7bn, or 10%, 4Q25 FCF outperformance and 2026 FCF guidance also came in $0.7bn (4–5%) above consensus. It added that an unexpected Q4 rebalancing charge also explains some of the outperformance.

Why Stifel Says International Business Machines (IBM) Remains a Top Large-Cap Defensive AI Stock

IBM shares rose after-market hours, a reflection of its FCF outperformance, robust software performance, and weakness leading into the report.

“IBM is now trading at ~35% premium to equal-weight S&P500, in-line with LTM trend. While we wouldn’t chase the stock, it remains our top large-cap defensive pick.”

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.

While we acknowledge the risk and potential of IBM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than IBM and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.