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IBM: The AI Software Selloff Has Dragged IBM Down 26% From

International Business Machines (NYSE: IBM) has been caught in the crossfire of the AI-driven software sector selloff, falling 6.3% in the past week alone and trading at $240.21 — a full 26% below its 52-week high of $324.90. The stock has broken below both its 50-day moving average ($288) and 200-day moving average ($280), a technical breakdown that has rattled momentum investors. But here's the thing Wall Street is getting wrong: IBM isn't a software startup that can be disrupted by a chatbot. It runs the core transaction processing systems for the world's largest banks, airlines, and government agencies. Its mainframes process 87% of global credit card transactions. Its enterprise software — including Red Hat, watsonx AI, and z/OS — is so deeply embedded in regulated industries that ripping it out would cost clients more than IBM's entire market capitalisation. The most recent quarter underscores the disconnect. IBM posted Q4 2025 revenue of $19.7 billion with a 61.6% gross margin — the highest in the company's modern history. Full-year 2025 revenue came in at approximately $67.5 billion, with diluted EPS of $11.13. At $224.5 billion in market cap and 21.6x trailing earnings, IBM is now cheaper than the S&P 500 average — an unusual situation for a company generating this level of free cash flow.

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IBM Analysis: The Quiet Reinvention

International Business Machines Corporation (NYSE: IBM) has undergone one of the most consequential strategic pivots in corporate history over the past four years. After spinning off its managed infrastructure business as Kyndryl in late 2021, CEO Arvind Krishna has relentlessly reoriented the 114-year-old company around hybrid cloud and artificial intelligence — and the financial results are starting to vindicate the strategy. IBM now trades at $256.40 per share, down roughly 21% from its 52-week high of $324.90 but still up meaningfully from its 52-week low of $214.50. The $240 billion company sits at an interesting crossroads: investors who bought the AI hype in late 2024 have been shaken out, but the underlying business is accelerating. Fiscal year 2025 delivered IBM's strongest revenue growth in over a decade, with full-year revenue reaching $67.5 billion across the four quarters — a significant step up from $62.8 billion in FY2024. The Q4 2025 quarter was particularly striking, with revenue hitting $19.7 billion and diluted EPS surging to $5.88 on the back of a substantial tax benefit. IBM's hybrid cloud platform, anchored by Red Hat, and its watsonx AI suite have become genuine growth engines rather than marketing buzzwords. With the stock pulling back to a 23x trailing PE — a notable discount to the broader tech sector — the question facing investors is whether IBM's transformation deserves re-rating or whether this is simply a legacy company borrowing momentum from the AI cycle.

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