IBM Stock 2026: Why Its Software Strategy Is Winning Over Skeptics

• Why Did Jefferies Upgrade IBM to "Buy"?
• Confluent Deal: A $11 Billion Bet on Real-Time Data
• Hybrid Cloud & AI: The New IBM Playbook
• Valuation Deep Dive: Is IBM Still Undervalued?
• FAQ: Your IBM Investment Questions Answered

IBM, once seen as a sluggish tech giant, is now turning heads under CEO Arvind Krishna’s bold transformation plan. With a recent upgrade from Jefferies and a $11 billion acquisition of Confluent, the company’s software-focused pivot is gaining traction. Could IBM’s current valuation still be a bargain compared to peers? Here’s the deep dive.

Why Did Jefferies Upgrade IBM to "Buy"?

On January 5, 2026, Jefferies analyst Brent Thill raised IBM’s rating from "Hold" to "Buy," hiking the price target from $300 to $360. The rationale? IBM’s clearer path to accelerated software growth and a glaring valuation gap. Trading at 26x 2027 P/E versus peers’ 35x, Jefferies sees room for catch-up if Red Hat synergies and recent acquisitions deliver. The stock responded with a 3% weekly gain, closing at $304.22 on Friday. (Source: TradingView)

Confluent Deal: A $11 Billion Bet on Real-Time Data

IBM’s pending acquisition of Apache Kafka specialist Confluent (targeted for mid-2026) is a strategic masterstroke. In my experience covering tech M&A, real-time data processing is the unsung hero of AI infrastructure. IBM estimates this market doubled to $100 billion since 2021. Financially, the deal is expected to boost adjusted EBITDA immediately post-closure. Pro tip: Watch for integration updates in the Q4 2025 earnings call on January 28.

Hybrid Cloud & AI: The New IBM Playbook

Krishna’s $6.4 billion HashiCorp buy (closed February 2025) and the Confluent MOVE mark IBM’s shift from hardware reliance to recurring software revenue. As one BTCC analyst noted, "IBM’s hybrid cloud stack is uniquely positioned to monetize enterprise AI adoption." The numbers back this: Software now drives 45% of revenue, up from 32% pre-Red Hat.

Valuation Deep Dive: Is IBM Still Undervalued?

Let’s geek out on the metrics. IBM’s 26x forward P/E looks cheap next to Microsoft (38x) or Oracle (34x). But here’s the kicker—its 5.2% dividend yield dwarfs the sector’s 1.3% average. The catch? Growth must accelerate to justify multiple expansion. Personally, I’d wait for Q4 guidance before jumping in.

FAQ: Your IBM Investment Questions Answered

What’s driving IBM’s stock momentum?

The Jefferies upgrade and Confluent deal have reignited interest in IBM’s software transition, with the stock up 12% YTD.

How does Confluent fit IBM’s strategy?

Confluent’s real-time data tech plugs directly into IBM’s AI and hybrid cloud roadmap, expanding its $100B addressable market.

When will IBM report next?

Mark your calendar for January 28, 2026—Q4 earnings could make or break this rally.