RBC Capital has raised its target price for IBM to $361.00 from $350.00 and retained an Outperform rating on the shares, citing a stronger-than-anticipated finish to the year and improved financial outlooks. The company currently trades at $294.16 and carries a P/E ratio of 35.23.
The investment firm attributed revenue upside to two principal drivers: a robust refresh cycle for the z17 mainframe and unexpectedly solid performance in the software division, with the Data segment singled out for particularly strong results. The firm highlighted that IBM's market capitalization stands at $274.96 billion and noted that the company posted 4.51% revenue growth over the last twelve months.
Looking ahead, IBM's guidance for fiscal 2026 revenue surpassed consensus expectations and the company raised its free cash flow outlook. The company also continues a long-standing shareholder return program, having paid dividends for 55 consecutive years and currently offering a 2.28% yield.
RBC Capital's analyst Matthew Swanson said the firm increased its price target after raising estimates in light of these developments. In addition, analysis from InvestingPro described the stock as slightly overvalued at current levels and referenced additional research materials available to subscribers.
IBM's recent quarterly and full-year results underpinned the wave of analyst revisions. For the quarter, the company reported 9% year-over-year revenue growth in constant currency and generated $7.6 billion in adjusted free cash flow. For the full year, IBM achieved 6% year-over-year revenue growth, delivered earnings per share of $11.59, and produced $14.7 billion in adjusted free cash flow - outcomes that exceeded both guidance and consensus.
Those results prompted several other firms to move their targets. JPMorgan raised its target to $317 while maintaining a Neutral rating. Wedbush moved its target to $340, citing momentum in IBM's generative AI business and a GenAI backlog of $12.5 billion. BofA Securities set a $340 target, pointing to better-than-expected revenue driven by growth in the Infrastructure and Data segments. Morgan Stanley adjusted its target to $304, noting that free cash flow had come in ahead of initial guidance. BMO Capital increased its target to $350, observing a solid quarter despite some softness in the Red Hat and Consulting segments that was offset by strong Data performance and free cash flow.
The combination of stronger-than-expected execution, a lifted FY2026 revenue outlook, and an improved free cash flow forecast provided the basis for RBC's revised valuation. Investors and market participants will likely monitor upcoming cadence details around the z17 refresh and the evolution of the Data segment and GenAI backlog as indicators of whether the recent momentum is sustainable.