International Business Machines Corp (NYSE:IBM)’s third quarter earnings report drew mixed reactions from analysts, who highlighted the company’s strong AI and infrastructure growth while expressing differing views on software execution.
For Q3, IBM reported revenue of $16.33 billion, above Wall Street estimates of $16.09 billion.
Infrastucture revenue grew 15% year-over-year to $3.56 billion, above estimates of $3.46 billion.
Software revenue was $7.21 billion, in line with estimates, while growth in its software subsidiary Red Hat decelerated to 20% year-over-year.
Wedbush sees IBM’s GenAI and automation initiatives as driving broad-based momentum and maintained an ‘Outperform’ rating with a $325 price target.
In contrast, Jefferies is more cautious- on the company, acknowledging the top-line beat but remaining on the sidelines until software growth shows consistent execution, maintaining a ‘Hold’ rating with a $300 price target.
The Wedbush analysts pointed to IBM’s GenAI backlog, which now totals $9.5 billion, up from $7.5 billion in the prior period, and highlighted the 22% year-over-year growth in automation.
They cited the company’s ability to generate $4.5 billion in cost savings through AI efficiencies and described the firm’s strategy as a “business flywheel” that is accelerating adoption across software, infrastructure, and consulting.
“We continue to believe IBM is well-positioned to capitalize on the current demand wave for hybrid cloud and AI applications as more enterprises are looking to leverage these capabilities across organizational workflows,” Wedbush wrote.
“We would be buyers of any modest knee-jerk weakness in the stock.”
Jefferies, meanwhile, acknowledged strong results in infrastructure and consulting, with consulting continuing to dominate GenAI engagements and representing more than 22% of IBM’s $31 billion consulting backlog.
However, the firm noted that software revenue, while growing 9% year-over-year in constant currency, was in line with expectations and offset by deceleration in Red Hat and transaction processing.
“We think the stock can grind higher if fundamentals strengthen and the software reacceleration thesis plays out, but remain on the sidelines until we see more consistent execution,” Jefferies wrote.
Shares of IBM traded at $283 in the early afternoon on Thursday, up about 29% so far in 2025.