After IBM stock (NYSE:IBM) dropped more than 7% following its Q2 2025 earnings release, several top analysts have come forward with a clear message: buy the dip. Despite concerns over software sales and macro uncertainties, the updated IBM stock forecast points to a compelling long-term growth story fueled by mainframe upgrades, hybrid cloud, and AI adoption.
IBM Earnings Beat, But Software Miss Sours Sentiment
IBM reported stronger-than-expected results for Q2, with revenue reaching $17 billion—above the $16.6 billion consensus. Adjusted earnings per share came in at $2.80, also beating estimates of $2.64. However, software revenue of $7.39 billion slightly missed the $7.43 billion forecast, sparking investor concern.
This minor miss, combined with broader macroeconomic anxieties, led to a 7% drop in IBM stock. But many analysts argue the reaction was overblown and present a bullish IBM stock forecast instead.
Analysts Say the Pullback Is Overdone
Melius Research believes the selloff doesn’t reflect IBM’s strong positioning. Analyst Ben Reitzes and his team pointed to IBM’s new z17 mainframe cycle as a key driver of future growth. They also highlighted strong performance from Red Hat, whose 16% growth in Q2 exceeded the 12% pace seen in Q1.
“We are buyers on weakness,” the Melius team wrote, citing long-term earnings upside, improved currency tailwinds, and a rebound in transaction processing. They also see potential in IBM’s quantum computing roadmap.
Wedbush Securities also maintained its “Outperform” rating and $325 price target, calling the dip a “knee-jerk” reaction. Analyst Dan Ives believes IBM is well positioned to benefit from the ongoing enterprise shift toward hybrid cloud and artificial intelligence platforms.
Even Bank of America, which trimmed its price target to $310, reaffirmed a “Buy” rating, describing IBM as a “show me” story that’s likely to outperform expectations in the second half.
Hybrid Cloud and AI Fuel Long-Term Growth
CEO Arvind Krishna struck a confident tone during the earnings call, saying enterprise clients around the world are investing in tech to scale revenue while managing costs. The company’s generative AI portfolio now boasts $7.5 billion in inception-to-date business, underscoring its strategic focus.
IBM raised its full-year free cash flow guidance and reiterated its goal to accelerate revenue growth in the coming quarters. While consulting continues to face short-term pressure, the $32 billion backlog and improved merger and acquisition environment could add future upside.
IBM Stock Forecast: Upside Potential Remains
According to analysts tracking the IBM stock forecast, free cash flow is projected to rise from $12.75 billion in 2024 to $18.21 billion by 2029. While IBM currently trades at 16.6 times forward FCF—above its 10-year average of 11.6x—many see this as a reflection of improved fundamentals and margin expansion.
Assuming a 7.4% compound annual growth rate in free cash flow and a 2.6% dividend yield, IBM’s valuation could reasonably climb to a 17x FCF multiple. That would push IBM’s market capitalization above $300 billion—around 25% upside from current levels. When factoring in dividend reinvestments, total returns could reach 35% over the next few years.
Analyst Consensus Leans Positive
Out of 21 analysts covering IBM stock, eight rate it a “Strong Buy,” one a “Moderate Buy,” 10 a “Hold,” and two a “Strong Sell.” The average target price is $269, modestly above today’s level, but many believe upside could accelerate if IBM executes on its software and AI strategy.
Bottom Line: A Smart Entry Point for Long-Term Investors?
The latest IBM stock forecast reflects growing optimism that the company’s mainframe cycle, Red Hat growth, and AI momentum will outweigh short-term concerns. For long-term investors seeking stability, strong cash flow, and exposure to next-gen enterprise tech, IBM may be a timely opportunity worth considering.
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Author Stephanie Bédard-Châteauneuf 
