UBS on Wednesday raised its rating on IBM to Neutral from Sell and assigned a price target of $236.00, saying the risk-reward equation for the stock has improved after a period of underperformance.
IBM shares have fallen 22% so far in 2026 and have lagged the S&P 500 by roughly 27% over the trailing 12 months, a slide UBS attributes to a run of uneven quarters in 2025 that weighed on investor confidence.
In its assessment UBS values IBM at approximately 18.5 times its 2026 earnings-per-share estimate of $12.43, and about 17.5 times its 2027 EPS forecast of $13.13. The company currently shows a reported price-to-earnings ratio of 20.6 and a notably low PEG ratio of 0.27, metrics UBS and other valuation indicators view as pointing to an attractive price relative to expected growth.
UBS expects IBM to generate organic revenue growth in the 3% to 4% range over the next several years. The bank also notes the stock yields roughly a 7% free cash flow return, a figure UBS says largely reflects market apprehension about competitive pressure to IBM’s Z vertically integrated mainframe platform from artificial intelligence across the broader software landscape.
Central to investor concern is whether AI-enabled translation of legacy COBOL applications could undermine demand for IBM’s infrastructure offerings. UBS, however, does not anticipate widespread mainframe disintermediation in the coming years. The bank points to factors it believes will sustain mainframe demand: strong customer stickiness, data sovereignty requirements, and a complex, vertically integrated stack that, UBS notes, provides quantum-safe encryption.
Given those considerations, UBS continues to model flat growth for IBM’s infrastructure segment even as it recognizes competitive risks stemming from AI-driven modernization tools.
Brokerage landscape and market reactions
Other firms have taken differing views. Jefferies has reaffirmed a Buy stance on IBM with a $370.00 price target, while Evercore ISI maintains an Outperform rating and a $345.00 target. Wedbush has also reiterated an Outperform rating and set a $340.00 price target, acknowledging competitive concerns from new AI-enabled COBOL modernization tools.
Those analyst positions and IBM’s strategy developments have intersected with market volatility. The stock experienced a roughly 13% decline after an announcement from Anthropic about an AI tool aimed at COBOL modernization, which prompted some investor worry over potential disruption to legacy systems. Following that drop, IBM’s share price recovered as analysts defended the resiliency of the mainframe business.
IBM partnerships and strategic moves
On the corporate development front, IBM disclosed a collaboration with Deepgram to add voice-AI capabilities to its watsonx Orchestrate offering. The partnership is designed to integrate Deepgram’s speech-to-text and text-to-speech technology, enabling more natural interactions with digital agents and expanding IBM’s AI product integration.
Taken together, the analyst commentary and partnership activity underscore IBM’s continued focus on marrying AI functionality with its mainframe and enterprise software footprint, even as the company navigates investor concerns about technological substitution.
Investor takeaway
UBS’s upgrade to Neutral and $236.00 target signals that, in its view, IBM’s current valuation and cash flow profile make the stock’s upside and downside more balanced than they were at lower ratings. At the same time, UBS and other analysts remain attentive to the evolution of AI-related competitive risks to IBM’s infrastructure and mainframe franchises.