Why IBM Is Rallying Today

IBM (IBM) is jumping 10% after the company reported higher-than-expected fourth-quarter earnings per share and provided 2025 free cash flow guidance that also surpassed analysts’ average outlook.

A Look at IBM’s Q4 Results and 2025 Guidance

The tech giant reported Q4 EPS of $3.92, well above analysts’ average estimate of $3.78. Its sales rose just 1% versus Q4 of 2023 to $17.5 billion, and the latter figure was in line with the mean outlook. However, the firm’s software revenue jumped 11% year-over-year in Q4, excluding currency changes, while it obtained almost $2 billion of AI-related bookings during the quarter.

A closeup of a woman’s hands typing rapidly on a laptop in a corporate office setting.

Moreover, the firm predicted that its top line would increase at least 5% this year excluding currency changes, while it provided 2025 free cash flow guidance of $13.5 billion, versus analysts’ average estimate of $12.9 billion. In 2024, it generated $12.7 billion of free cash flow.

IBM’s Comments

AI will “be a long-term future vector of growth for consulting that has a multiplier effect that will drag along our software component,” CFO James Kavanaugh said during the firm’s earnings call.

“We are confident that our investment in partnerships and skills as well as our early leadership in GenAI positioned us to accelerate Consulting growth as we move forward,” CEO Arvind Krishna said during the call.

While we acknowledge the potential of IBM, 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 but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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