JPMorgan Recommends Buying IBM, Highlighting Undervalued Software Growth

International Business Machines (IBM) should be recommended for purchase due to an underappreciated opportunity within its expanding software segment, according to JPMorgan. The investment bank has upgraded IBM from a neutral stance to overweight and increased its price target to $291 per share from $270, suggesting a potential 15% upside from the previous close. Analyst Brian Essex noted, “We are upgrading with greater confidence in a second‑half 2026 software acceleration, driven by deeper analysis of IBM’s software business. Software continues to generate higher recurring revenue, improved margins, stronger profitability, and robust cash flow.” He added that software now accounts for roughly 45% of IBM’s revenue and about two‑thirds of its consolidated profit, making it a key growth engine. The analyst highlighted a shift toward higher‑margin, ratable software that offers better cash conversion and a more stable earnings stream, justifying a higher valuation multiple compared to hardware and services. Essex also described IBM’s four software pillars—hybrid cloud, automation, transaction processing, and data—as a flywheel that underpins infrastructure investments, emphasizing the durability of this engine. The JPMorgan recommendation aligns with broader street consensus, as 15 of the 25 analysts covering IBM have buy or strong‑buy ratings. Despite a year‑to‑date decline of nearly 15% in IBM’s share price, the outlook for its software business remains positive.

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