IBM is a moderate buy; DCF fair value ~$254 vs price ~$220 implies ~15% upside in 12-18 months.

Although the company’s last quarter came in just 1% below revenue expectations compared to the same quarter last year, IBM still expects revenue growth of around 5% for the full year.

IBM is also one of the leading companies in quantum computing, and this could be the next generation after artificial intelligence.

IBM is also integrating artificial intelligence internally to boost productivity, and its revenue per employee is seeing a significant increase as it keeps costs under control while increasing revenue.

Does all of this make IBM stock an attractive buy option right now?

Let's take a closer look at the latest developments and examine the long-term performance compared to the valuation to determine whether this represents an attractive investment.

IBM has successfully boosted growth to $69 billion over the past twelve months. Its revenues increased from a low of around $50 billion in 2021 following divestments from some non-core operating businesses.

Looking ahead, as mentioned in the introduction, management anticipates revenue growth at average single-digit rates, which is what investors can expect from IBM in the coming years.

IBM restructured its business in 2021, and those improvements led to increased profitability. The operating profit margin hit a low of 11% in 2021, and this figure has almost doubled to 21% over the past twelve months.

This is almost the highest operating margin the company has achieved in a decade. The productivity enhancements I mentioned earlier in the video could lead to cash savings and financial improvements for the company exceeding $1 billion over the next 12 to 24 months.

In addition to the improved operating profit margin, the company's return on invested capital also improves. At approximately 11%, this is roughly equivalent to the company's weighted average cost of capital.

Historically, IBM's returns on invested capital were declining prior to business restructuring.

Following those restructuring operations, its returns on invested capital began to improve, and it is reasonable to assume that the company could return to return levels exceeding 20%.

These cost-saving initiatives are keeping expenses under control while revenues continue to rise.

Also, revenue per employee is reaching record levels for IBM. IBM's valuation declined in 2026. At the start of the year, the company's stock was trading at a forward price-to-earnings ratio of 23.

Today, it is trading at a forward price-to-earnings ratio of 16.7.

There is no doubt that recent disappointing quarterly results have worried investors and led to lower valuations. The stock is now trading at the lower end of its historical range according to this valuation criterion over the past few years.

Today, I updated IBM's discounted cash flow model with slight upward adjustments to the amount of cash flow I expect the company to generate over the next few years. There were those concerns, which led me to lower my estimates for future free cash flow, but since then business has stabilized and the system has improved.

The intrinsic value or fair value of the stock that I calculated for IBM was approximately $254, compared to a market price of $220.

This leaves room for an increase of approximately 15% from the current market price over the next 12 to 18 months. So far in 2026, IBM's stock has fallen by about 26%. It is approaching its lowest levels for this year.

I last updated my rating for IBM on July 27, 2026, rating it as a buy opportunity with moderate conviction. Today, I will reiterate that assessment, as I believe it is a moderately convincing buying opportunity, and I can say that I am more optimistic about IBM stock today than I was on July 27 when I assessed and rated the company as a buying opportunity.

Of course, there is no risk-free investment, and investors should consider the risk-reward ratio, and in this case I feel that the balance is in favor of the investor.