IBM’s AI business has exploded as enterprises rapidly adopt its proprietary platform and AI-enhanced solutions across critical workflows. Meanwhile, a key acquisition positions IBM perfectly in the hybrid cloud productivity market where regulated industries prioritize security and compliance over pure public cloud solutions.
Finally, IBM’s proven ability to generate cash flow combines well with its 30-year dividend aristocrat status and current 2.6% yield. So, you get both growth potential and income stability while the stock trades at a reasonable 23.5 times forward earnings.
We feel that multiple is well-justified by strong operating leverage from surging AI and hybrid cloud growth as well as a powerful cash flow foundation that provides both downside protection and upside potential.
INTERNATIONAL BUSINESS MACHINES CORP. (New York symbol IBM) is one of the world’s largest computer firms, with operations in over 175 countries. It’s a #1 Buy for 2025.
IBM continues to invest heavily in R&D. The company’s research costs rose 14.0% in the quarter, to $2.10 billion (or 12.4% of revenue) from $1.84 billion (11.7% of revenue).
IBM’s research efforts include artificial intelligence software—and in fact, the company has one of the largest and best-funded AI research programs in the world.
As part of that, it has developed the Watsonx AI platform. Watsonx has three key applications:
Watsonx.ai is a new studio that provides a comprehensive set of tools to create new foundation models, generative AI and machine learning.
The Watsonx.data lake house combines a data lake’s flexibility and a data warehouse’s performance. This is a centralized repository to store structured, unstructured, semi-structured and multimodal AI data.
The Watsonx.goverance toolkit enables AI workflows with responsibility and transparency. It helps users track the data used to train AI models, understand model lineage, identify biases and monitor model drift.
Meanwhile, IBM now plans to build an advanced quantum computer at its datacentre in Poughkeepsie, New York.
Quantum technology uses electrons rather than transistors. As a result, quantum chips can carry out a vast number of calculations simultaneously. That makes them much faster than the chips now powering regular computers.
Called IBM Quantum Starling, this new computer can perform 20,000 times more operations than today’s quantum computers. It should begin operating in 2029.
The leading-edge technology will run advanced artificial intelligence applications, as well help solve complex problems in fields such as cybersecurity, cryptography and chemistry.
Sales and earnings keep rising for this tech leader
IBM reported better-than-expected results for the first quarter of 2025. However, the stock fell 9% as revenue from its software operations, specifically, missed forecasts.
In the three months ended June 30, 2025, overall revenue rose 7.7%, to $16.98 billion from $15.77 billion a year earlier. That topped the consensus forecast of $16.59 billion. If you exclude exchange rates, revenue in the quarter rose 5%.
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Software revenue (44% of the total) in the quarter rose 9.6% to $7.39 billion. However, that missed the consensus forecast of $7.43 billion.
Earnings before unusual items also gained 16.6%, to $2.65 billion from $2.28 billion. Due to more shares outstanding, per-share earnings rose 15.2%, to $2.80 from $2.43. That beat the consensus estimate of $2.64.
IBM still expects its overall revenue (excluding currency rate movements) will rise at least 5% in 2025.
With the June 2025 payment, IBM raised your quarterly dividend by 0.6%, to $1.68 a share from $1.67. The new annual rate of $6.72 yields a solid 2.6%. The company has paid regular dividends since 1916 and has increased the annual rate each year for the past 30 years.
This year’s earnings should also rise about 6% to $10.94 a share, and the stock trades at a reasonable 23.5 times that estimate.
Recommendation in Canadian Wealth Advisor: IBM Corp. is a buy.
