Jim Cramer Defends Unpopular IBM Stock, Says Market Misjudges Turnaround Progress

During the August 24 episode of Mad Money, a viewer asked Jim Cramer for his take on initiating a position in International Business Machines (NYSE:IBM). Cramer acknowledged the difficulty but expressed his belief that the company’s performance is stronger than perceived.

IBM’s rather, I mean, it’s very tough. I think it’s doing better than people think. It’s all the way down. But I have to tell you, I know that people hate the stock even though I don’t think they should and I got to keep that in mind.

Cramer’s defense of IBM aligns with his evolving perspective over recent months. Back in June, during another Mad Money appearance, he cautioned investors against chasing momentum after the stock surged approximately 80 points in a week.

Oh, okay… look, I think you raised a really interesting question. You said it was up, down, up, down. This stock is up about 80 points in like a week. I think we gotta give it a chance. I want it to come down before I can give it my seal of approval. And I like it very much, but it’s up on a spike, and you know, I don’t recommend a parabolic move… It’s hardly ever worked.

By mid-July, as shares pulled back sharply, Cramer’s tone shifted toward aggressive accumulation, urging callers to begin building positions.

I want you to buy the stock… of IBM. You buy some now and then, it’s been having these kind of panic fits, just panic attacks, you buy the rest then. I think IBM’s terrific. It’s inexpensive, and Arvind Krishna’s doing a fantastic job.

Software Growth Offsets Hardware Weakness

IBM’s transformation narrative continues to resonate amid ongoing enterprise digitalization efforts. In its second-quarter results, the company posted revenues of $17.2 billion and non-GAAP earnings per share of $2.93, meeting analyst expectations. Though large-deal delays and IBM Z mainframe softness weighed on headline numbers, the software segment reinforced its role as a key driver, delivering $7.8 billion in revenue—a 5% year-over-year gain. Red Hat contributed substantially with 11% growth, while data and AI-focused software solutions expanded at double-digit rates, underscoring robust client adoption of hybrid cloud and artificial intelligence platforms.

Hardware Declines Prompt Conservative Outlook

The infrastructure division reported a 7% drop in quarterly revenues to $3.8 billion, largely due to reduced demand for legacy systems following prior mainframe upgrade cycles. Management revised its full-year guidance, projecting 4% to 5% constant-currency revenue growth. While cautious, this outlook reflects ongoing structural shifts rather than fundamental deterioration, yet it has fueled continued skepticism among investors wary of traditional tech names.

Institutional Activity Signals Renewed Confidence

Data from Insider Monkey tracking over 1,000 hedge funds reveals growing institutional interest in IBM during Q2 2026. The number of funds holding positions rose from 59 to 74 quarter-over-quarter. Notable increases came from firms such as AQR Capital Management, which boosted holdings by 43%, Marshall Wace LLP raising exposure by 492%, and Citadel Investment Group increasing stakes by 107%. Despite recent market pessimism, short interest remains relatively low at 2.62% of the public float, indicating limited bearish conviction.

International Business Machines stands as a hybrid entity—caught between transitional challenges and long-term strategic gains. Cramer’s commentary throughout the summer highlights the importance of evaluating operational progress beyond temporary sentiment fluctuations. For investors equipped to navigate volatility, IBM may present an opportunity hidden beneath widespread pessimism.

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