JPMorgan's analyst Brian Essex emphasized that IBM's software division is a crucial growth driver, accounting for approximately 45% of the company's revenue and two-thirds of its profit. The upgrade to overweight reflects increased confidence in the software segment's performance, particularly in the second half of 2026.
Essex noted that the shift towards software is beneficial due to its higher margins and better cash flow compared to IBM's hardware and services. He identified four key software areas—hybrid cloud, automation, transaction processing, and data—that could enhance IBM's infrastructure investments.
Despite a nearly 15% decline in IBM's shares year-to-date, the consensus among analysts remains positive, with 15 out of 25 recommending a buy or strong buy. This upgrade suggests that investors may be overlooking the long-term value of IBM's software capabilities