IBM combines defensive blue-chip quality with multiple growth drivers. The software business is expanding at a double-digit pace and driving margin expansion, its mainframe refresh cycle is delivering a 51% infrastructure revenue boost, and the company’s AI consulting approach is producing $9.5 billion in bookings with predictable ROI for enterprise customers. The company also offers quantum computing leadership which could position the company at the forefront of a potential $97 billion market by 2035.
The 2.4% dividend yield is backed by 31 consecutive years of increases and an unbroken payment streak dating to 1916, giving income investors exceptional reliability.
The stock trades at 22.9 times forecast 2026 earnings. That’s very reasonable for a company with recurring software revenue, improving margins, and multiple growth catalysts.
INTERNATIONAL BUSINESS MACHINES CORP. (New York symbol IBM; www.ibm.com) is one of the world’s largest computer firms, with operations in over 175 countries.
IBM took a big jump recently on news that it is one of nine firms developing quantum computing technologies that will receive financial support from the U.S. federal government.
IBM will now transfer its quantum operations to a new business called Anderon, which will get $1 billion from the government to help build a chipmaking facility. It aims to start selling quantum computers to commercial clients by 2029.
Quantum computing 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.
However, the technology faces several challenges. For instance, quantum computers must operate in extremely cold environments and are vulnerable to electromagnetic radiation.
Meanwhile, IBM recently completed the acquisition of Confluent Inc. (Nasdaq symbol CFLT). That firm makes software that moves and processes data in real time across internal systems, cloud environments, and applications. These tools are particularly important to the performance of new artificial intelligence-powered computing services. The purchase price was $11 billion.
Confluent’s technology enhances IBM’s hybrid cloud systems, which integrate a firm’s own private cloud servers with the public cloud servers. Hybrid systems help its clients protect their sensitive data against cyberattacks, data thefts and ransom demands.
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IBM’s revenue and cash flow growth forecasts remain strong
IBM reported stronger-than-expected results in the latest quarter.
In the three months ended March 31, 2026, IBM’s overall revenue rose 9.5%, to $15.92 billion from $14.54 billion a year earlier. That topped the consensus forecast of $15.62 billion. If you exclude exchange rates, revenue in the quarter rose 6%.
Earnings before unusual items also gained 20.0%, to $1.82 billion from $1.52 billion. Due to more shares outstanding, per-share earnings rose 19.4%, to $1.91 from $1.60. That beat the consensus estimate of $1.81.
The company continues to invest heavily in its own artificial intelligence software. Its research costs rose 11.4% in the quarter, to $2.17 billion (or 13.7% of revenue) from $1.95 billion (13.4% of revenue).
IBM expects its revenue (excluding currency rate movements) will rise 5% in 2026. This year’s free cash flow (regular cash flow less capital expenditures) should also rise by $1 billion to about $15.7 billion.
Thanks to that rising cash flow, IBM has raised your quarterly dividend by 0.6%. Stating with the June 2026 payment, investors receive $1.69 a share instead of $1.68. The new annual rate of $6.76 yields a solid 2.4%. The company has paid regular dividends since 1916 and has increased the annual rate each year for the past 31 years.
Moreover, the stock trades at a reasonable 22.9 times this year’s likely earnings of $12.41 a share.
Recommendation in Canadian Wealth Advisor: IBM Corp. is a buy.
