Erste Group has revised its view on IBM, lowering the stock from buy to hold on concerns about waning growth in the company’s infrastructure business. The move accompanies a short-term decline in IBM shares, which have fallen 5.32% over the past week and are trading at $259.39.
Erste Group highlighted IBM’s forward guidance and financial projections as part of its assessment. IBM is projecting sales growth of about 5% year-over-year for 2026, a figure that aligns with consensus revenue forecasts. Management expects free cash flow to rise by roughly $1 billion to about $15.7 billion, building on the $11.58 billion in levered free cash flow reported over the last twelve months.
By business segment, IBM expects software revenue to expand at about a 10% year-over-year clip this year. The infrastructure segment - notably the IBM Z mainframe business - produced very strong sales gains in the most recent quarter, but Erste Group anticipates that growth in this area will moderate in the coming quarters. Meanwhile, consulting revenue is expected to remain at very low growth levels.
Erste Group analyst Hans Engel flagged a balance-sheet concern in his assessment, noting: "The significant year-on year increase in non-current liabilities is a negative factor." That observation factored into the decision to lower the rating despite other constructive elements of IBM’s financial profile.
On valuation and shareholder returns, IBM posts a price-to-earnings ratio of 23.32 and a dividend yield of 2.6%. The company offers a suite of technology products and services to enterprise clients worldwide, including hybrid cloud platforms, artificial intelligence solutions, and consulting services.
Market estimates place IBM trading slightly below its fair value, with analysts projecting earnings per share of $12.71 for 2026. The combination of modest top-line guidance, a projected increase in free cash flow, and the noted balance-sheet shift informs the cautious stance from Erste Group.
In separate corporate news, Confluent, Inc. posted fourth-quarter results that outpaced Wall Street expectations. The company reported 21% year-over-year revenue growth, with total revenue of $314.8 million versus a consensus figure of $308.06 million. Confluent’s adjusted earnings were $0.12 per share, beating the analyst projection of $0.10.
Subscription revenue, a primary component of Confluent’s business, rose 20% year-over-year to $301.6 million. Confluent Cloud revenue expanded 23% to $169 million. These figures underscore continued revenue momentum tied to cloud adoption.
Erste Group’s downgrade of IBM reflects a more guarded near-term outlook for infrastructure-related sales growth even as software expansion and anticipated free cash flow improvements support parts of the company’s financial story. Investors weighing IBM exposure may balance the firm’s reliable cash generation and dividend yield against emerging pressures in the infrastructure and consulting segments.