IBM’s IBM stock fell 6% in today’s trading session despite beating its first-quarter expectations after-market hours on Wednesday and maintaining its full-year revenue guidance.
That said, let’s see if the post-earnings selloff is a buying opportunity, considering IBM stock is still up +4% year to date and has impressively outperformed many of its tech peers, with the Nasdaq down 11% in 2025.
IBM’s Favorable Q1 Results
Having a focused strategy around hybrid cloud and AI, IBM CEO Arvind Krishna stated the company is off to a strong start to the year, driven by solid revenue growth, profitability, and cash flow generation.
IBM’s Q1 sales came in at $14.54 billion, eclipsing estimates of $14.44 billion and rising from $14.46 billion in the comparative quarter. On the bottom line, Q1 EPS of $1.60 was down from $1.68 a year ago but beat expectations of $1.42 per share by 12%. Furthermore, IBM generated a multi-year high for Q1 free cash flow at $2 billion.
Notably, IBM has exceeded the Zacks EPS Consensus for nine consecutive quarters with an average earnings surprise of 7.9% in its last four quarterly reports.
IBM Maintains its Full-Year Guidance
Reassuringly, IBM maintained its full-year guidance for accelerating revenue growth of 5% or more, which came in above projections of $65.09 billion or roughly 4% growth. Based on Zacks estimates, IBM’s top line is forecasted to expand another 5% next year to $68.73 billion.
IBM also maintained its full-year free cash flow guidance of $13.5 billion, which would be a slight uptick from $12.95 billion in 2024.
Monitoring IBM’s P/E Valuation
Trading around $230, IBM stock is at a 22.8X forward earnings multiple. While this is near the benchmark S&P 500, IBM does trade at a noticeable premium to its Zacks Computer-Integrated Systems Industry average of 11.3X, with some notable peers being Advanced Micro Devices AMD and Micron Technology MU.
Bottom Line
For now, IBM stock lands a Zacks Rank #3 (Hold). To that point, more upside from here may largely depend on what is hopefully a trend of positive earnings estimate revisions in the coming weeks, as analysts digest IBM’s favorable outlook despite tariff concerns impacting the broader market.
This article originally published on Zacks Investment Research (zacks.com).
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