Jefferies Upgrades IBM on Software Growth and Strategic Acquisitions

Analysts at Jefferies have revised their position on International Business Machines Corp. (IBM), shifting their rating from "Hold" to "Buy." In a significant move, the investment bank has also raised its price target for the company's shares from $300 to $360, citing a reinvigorated software division and strategic acquisitions as key catalysts.

The upgrade is rooted in what Jefferies describes as a "clearer perspective" on IBM's potential for accelerated software growth in the current year. Analyst Brent Thill, who favors infrastructure providers over pure application vendors in his 2026 software outlook, identifies IBM as a primary beneficiary of this sectoral shift. The firm is methodically constructing a comprehensive ecosystem for enterprise artificial intelligence (AI).

According to Jefferies, three major drivers underpin this optimistic assessment:

• The Red Hat Engine: The open-source platform, acquired in 2019 for $34 billion, continues to demonstrate robust momentum.
• HashiCorp Integration: The $6.5 billion acquisition finalized in February 2025 significantly enhances IBM's cloud automation capabilities.
• The Pending Confluent Deal: The planned $11 billion acquisition of Confluent, expected to close in the second half of 2026, is viewed as a central component for building confidence. It addresses a gap in real-time data streaming, a capability deemed especially critical for AI workloads.

"These steps strengthen IBM's hybrid cloud and data platform capabilities and create cross-selling opportunities," Thill noted.

Should investors sell immediately? Or is it worth buying IBM?

Valuation Gap Presents Opportunity

Despite IBM shares gaining more than 30% in 2025, Jefferies sees further room for appreciation. The firm argues that, when measured against expected 2027 earnings, the stock still trades at a discount to comparable software peers. The new $360 price target suggests an approximate 22% upside potential from current levels.

IBM's stock closed at $294.97 on Monday, marking a 1.2% gain. From a technical analysis perspective, the equity is currently moving within a consolidation pattern, with a key breakout point identified at $324.90—its 52-week high from November 2025.

Mainframes: An Overlooked Growth Contributor

Beyond the software segment, Thill highlighted the often-underestimated contribution of IBM's mainframe business. The new z17 generation, specifically designed for AI applications, is contributing to improved performance in the infrastructure segment. This legacy division remains a steady growth driver that the market frequently overlooks.

Investors are now looking ahead to the next major catalyst: IBM's fourth-quarter 2025 results, scheduled for release later in January. Wall Street anticipates earnings per share of $4.33, which would represent a year-over-year increase of 10.5%.