IBM (NYSE:IBM) stock has surged significantly in after-hours trading by 10% and 9% in pre-market trading. This is due to IBM reporting solid Q4 2024 results and bullish guidance for 2025. Here’s everything you need to know:
IBM reported Q4 revenue at $17.55 billion, up 2% year-over-year at constant currency. This slightly exceeded estimates. Adjusted EPS of $3.92 also beat analyst estimates of $3.78.
The software revenue was solid. It grew 11% due to Red Hat growing 16%. Software now accounts for 45% of IBM’s business.
AI momentum also doesn’t seem to be slowing down. Generative AI bookings reached $5 billion. It is up nearly $2 billion since the last quarter. A fifth of this is from software, and the rest is from consulting.
IBM now forecasts 5% growth in 2025. This is up from 3% in 2024. The boost in revenue growth is expected to mostly come from hybrid cloud and AI demand. FCF is also projected to be $13.5 billion in 2025 vs. $12.7 billion in 2024. This handily exceeds Wall Street’s $12.9 billion estimate.
IBM is pivoting to high-growth areas and turning the business around from a slow consulting company to an AI and hybrid cloud company. The pivot is already paying off greatly. Given how fast the bookings growth has been, IBM could even exceed 2025 guidance.
As mentioned before, IBM is up significantly after it reported its earnings. Analysts are also hiking their price targets. Stifel raised its price target to $271 from $246. JPMorgan raised its price target to $244 from $233. Many other analysts are also quickly raising their price targets.
It is also worth keeping in mind that IBM pays a solid dividend. It is one of the only tech stocks with such dividends. The current dividend yield is at 2.57%.
All things considered, IBM will likely climb up more as long as AI optimism is around.