A Capex Reprioritization - 5 Key Takeaways

Research evidence excerpt

A Capex Reprioritization - 5 Key Takeaways

s of our Bull, Technology Diffusion: Positive

Base, and Bear case scenarios playing out were estimated with implied volatility data from the options market as of 13

View descriptions of Risk Rewards Themes hereJul 2026. All figures are approximate risk-neutral probabilities of the stock reaching beyond the scenario price in either

three-months’ or one-years’ time. View explanation of Options Probabilities methodology here

BULL CASE $440.00 BASE CASE $293.00 BEAR CASE $190.00

25.3x P/FCFe of CY26 $17.38/share (ex- 17.7x P/FCFe of CY26 $16.55/share (ex- 11.8x P/FCFe of CY26 $16.05/share (ex-

receivables) receivables) receivables)

IBM Quantum becomes more material to the Stable fundamentals drives 6% Y/Y revenue Tough macro environment leads to budget

model. General consensus is that IBM has a growth at CC and 8% Y/Y FCF growth in cuts, and IBM FCF grows 4% Y/Y CC in

seat at the gen-AI and Quantum table, and CY26. Consulting grows 2.2% Y/Y at CC due CY26. RHT growth slows due to share loss,

customer wins/revenue outpaces to green shoots in IT services and easy and acquisitions in Software fail to increase

expectations. IBM accelerates Consulting & comps, Software grows 11.2% Y/Y at CC due portfolio relevancy, driving core growth to

Software growth, as competitive positioning to extended ELA cycle renewal in 2026, decelerate faster than expected. ELA cycle in

improves on the core business. Additionally, Infrastructure increases 0.8% Y/Y at CC. AI 2026 also fails to materialize. IT Services

quantum adds $180B in Enterprise Value on Consulting bookings gradually become spend does not rebound due to mis-

top of our base case valuation, and as a additive to Consulting revenue growth. We execution, causing Consulting revenue to