Evercore ISI reaffirmed an Outperform rating on International Business Machines (NYSE:IBM) and maintained a $345.00 price target on Tuesday, signaling what the firm views as meaningful upside from the stock's prevailing market price. At the time of the note the share price was $229.43, a level that represents an approximate 13.5% decline over the preceding week.
Evercore ISI's note focuses squarely on the economics and operational characteristics of IBM's mainframe offering, known as IBM Z. The firm framed the value of the mainframe not as a function of legacy COBOL code alone but as the outcome of a vertically integrated platform. That platform, Evercore ISI said, bundles z/OS with components such as CICS, IMS, Db2, RACF, MQ, Parallel Sysplex and Cybervault, together with DS8K storage hardware, enabling what the firm describes as up to 25 billion encrypted transactions per day on a single system.
Beyond transaction throughput, Evercore ISI emphasized the platform's suitability for AI workloads and mission-critical processing. IBM Z is presented as delivering 450 billion AI inferences per day with a one millisecond response time, availability characterized as eight nines of reliability, and quantum-safe encryption. According to the firm, efforts to modernize COBOL workloads by translating code into contemporary languages or migrating it to alternative environments do not recreate the mainframe's combination of transactional resilience, security, performance and scale efficiency.
Evercore ISI also identified AI tools as a potential enhancement to the mainframe value proposition. The firm cited watsonx Code Assistant for Z as an example of software that can generate COBOL code for mainframe applications, potentially easing modernization efforts while preserving mainframe-specific optimizations. The note drew an analogy between COBOL's optimization for IBM Z and how iOS performance reflects the tight coupling of Apple hardware and software, arguing that that level of integration contributes to the mainframe experience.
The analyst highlighted customer segments where mainframes remain prevalent - governments, healthcare and financial services - noting that data sovereignty and residency concerns make migration to other platforms difficult. Evercore ISI further commented that such considerations do not fully capture factors like data gravity and the costs of ingesting and exporting data, which can complicate moves away from mainframe environments.
Independent analysis available through InvestingPro was referenced as identifying IBM as a prominent player within the IT services sector. That source provided additional valuation context, noting that at the current share price IBM was trading at a price/earnings-to-growth ratio of 0.27, which the analysis interpreted as evidence of undervaluation.
Related corporate developments and contrasting analyst views
Recent corporate activity and analyst coverage add layers to the mainframe narrative. IBM announced a partnership with Deepgram to integrate advanced speech-to-text and text-to-speech capabilities into its watsonx Orchestrate AI product, with Deepgram described as IBM's first voice partner for that solution. Separately, Jefferies reiterated a Buy rating on IBM and set a $370 price target, calling out watsonx Code Assistant for Z as a mechanism to address potential disruption in legacy COBOL workloads.
Not all analysts are uniformly bullish. Evercore ISI's Outperform and Jefferies' Buy coexist with a recent downgrade from Erste Group to Hold, which the latter attributed to expectations of slower growth in IBM's infrastructure business. IBM has provided its own medium-term targets, forecasting roughly 5% year-over-year revenue growth by 2026 and anticipating free cash flow rising to about $15.7 billion.
Bottom line
Evercore ISI's call rests on the argument that IBM Z's integrated hardware-software stack delivers differentiated transactional and security properties that are difficult to replicate through simple code transformation or migration. That assessment aligns with other positive analyst views on mainframe modernization tools, while contrasting opinions on growth prospects for IBM's infrastructure business point to lingering near-term uncertainty for investors.