Key Takeaways
- Barclays launched coverage of IBM with an Overweight rating and set a $350 price objective on Monday.
- Shares of IBM jumped approximately 11-12% to roughly $330 during premarket hours.
- The optimistic outlook focuses on IBM’s software operations, which account for almost 50% of revenue and the majority of earnings.
- Analyst Raimo Lenschow from Barclays emphasizes that IBM’s infrastructure software caters to major, regulated corporations — establishing a “sticky” client base resistant to AI disruption.
- This upgrade amplifies recent strength: IBM has climbed 28% in the past month and recently recorded its best weekly performance in a quarter-century.
Shares of IBM experienced a significant rally on Monday following a positive initiation from Barclays — and the catalyst wasn’t related to quantum computing developments.
International Business Machines Corporation, IBM
IBM climbed approximately 11% in premarket activity to $330.11 after Raimo Lenschow, an analyst at Barclays, started coverage with an Overweight rating and established a $350 price objective. This target suggests an additional 17.5% gain from premarket levels.
The technology giant has been experiencing remarkable momentum. IBM has advanced 28% during the previous month and recently achieved its most impressive weekly rally in 25 years. Recent weeks have proven exceptionally rewarding for Big Blue investors.
While quantum computing has dominated recent headlines — IBM secured $1 billion in federal support through the CHIPS and Science Act to establish a dedicated quantum chip manufacturing facility, followed by a commitment of over $10 billion for quantum research and production over the next half-decade. However, this isn’t the primary driver of Lenschow’s bullish stance.
The Core Software Narrative
His investment case is more straightforward: IBM has transformed into a software-driven enterprise, and the market hasn’t completely recognized this shift.
Approximately half of IBM’s total revenue derives from software operations, which also contribute the lion’s share of company profits. Lenschow anticipates this revenue composition expanding further given software’s superior growth characteristics.
The critical element of his analysis involves the nature of IBM’s software offerings. These aren’t consumer-facing applications or trending AI tools. Instead, IBM provides fundamental infrastructure solutions — Red Hat Enterprise Linux, Red Hat OpenShift, automation platforms, and data analytics systems — designed explicitly for large, sophisticated enterprises operating hybrid cloud and on-premises infrastructures.
These clients will never transition entirely to cloud environments, Lenschow observes. This dynamic establishes a captive, predictable revenue stream that’s challenging to replace.
“We see mid single digit organic revenue growth and ongoing margin leverage, which should create a stable earnings compounder with a Quantum option,” he wrote.
An Emerging Consensus
Lenschow isn’t breaking new ground with this perspective. Oppenheimer analyst Param Singh employed similar terminology in January, characterizing IBM’s software suite as “sticky.” Evercore ISI’s Amit Daryanani reinforced this view in February. Additionally, in April, Citi Research analyst Fatima Boolani described IBM’s software and hardware as firmly embedded “across the most critical points of the world’s largest, most complex IT infrastructures.”
This convergence of analyst endorsements demonstrates a compelling narrative gaining momentum: IBM’s enterprise software foundation isn’t a weakness — it’s a competitive advantage.
There’s also increased social media attention contributing to the momentum. Remarks from Donald Trump in December commending IBM’s CEO have reemerged online, circulating alongside conversations about other occasions where the president has publicly mentioned particular stocks in 2025.
The overall Wall Street sentiment remains more measured. Among analysts currently tracking IBM, 10 rate it as Buy while 11 rate it Hold — producing a Moderate Buy consensus. The mean price target stands at $291.69, indicating the stock may be fairly valued at present levels following its recent surge.
IBM’s latest financial results demonstrated a software division that continues to exceed expectations, with the corporation emphasizing hybrid cloud capabilities and AI integration throughout its enterprise customer portfolio.
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