International Business Machines Corp (IBM.N): First Cut at Model Update Before Formal Guide Due 7/22; Lowering Estimates and PT

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International Business Machines Corp (IBM.N): First Cut at Model Update Before Formal Guide Due 7/22; Lowering Estimates and PT

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17 Jul 2026 06:55:10 ET │ 13 pages

International Business Machines Corp

(IBM.N)

First Cut at Model Update Before Formal Guide Due 7/22; Lowering

Estimates and PT

CITI'S TAKE Buy

Price (16 Jul 26 16:00) US$219.05Following IBM’s negative pre-announcement and ahead of formal guidance

update 7/22, we're taking first-cut on lowering CY26E/CY27E. We're assuming Target price US$255.00↓

no immediate mainframe deal recapture (as prevailing supply chain dynamics from US$375.00

persist and prolong purchasing pauses), deferred/delayed infra support and TP

(also at lower attach) & flattish organic software business trends (noting Hashi Expected share price 16.4%

+ Confluent will be in CY27 organic base). Aggregate margin profile return

(OPM/FCFM) also compresses as infra/software, representing 80%+ of Expected dividend yield 3.1%

aggregate profitability, remains sluggish, despite mgmt signaling willingness

Expected total return 19.5%towards reinforcing operational efficiency. On reduced CitiE with total revs

LSD/OPM high-teens/FCF ~20% (vs. MSD/low-20s/low-20s prior), we cut Market Cap US$205,882M

equally-weighted EV/FCF’27, P/E’27 targets to 22x/24x (prior 24x/25x) -

pulling PT to $255 (from $375). This embeds increased earnings

volatility/murky visibility on mainframe+attached software rehab scope, and

AI-imposed structural mainframe disruption (will take several Qs to disprove). Price Performance

Our SoTP analysis arrives at $190, implying ~17x/19x EV/FCF, P/E on updated (RIC: IBM.N, BB: IBM US)CY27E. Our forecasts exclude quantum impact.

CY26E/CY27E Topline Adjustments — For CY26E, we lower our Software revenue