IBM has raised its full-year free cash flow guidance to $14 billion, reflecting improved operating leverage across its portfolio. Through the first nine months of fiscal 2025, year-to-date free cash flow climbed from $6.6 billion to $7.2 billion, driven by disciplined working-capital management in both its hybrid cloud and infrastructure segments. This upgrade underscores management’s confidence in the resilience of its consulting and software businesses, and provides additional flexibility for strategic investments or shareholder returns.

Jefferies analysts reiterate a Buy rating on IBM, highlighting expectations for a renewed acceleration in software revenues in 2026. Their model projects software growth to outpace the company’s historical trend, supported by traction in watsonx.ai adoption and cross-sell opportunities within existing enterprise accounts. The firm anticipates upward estimate revisions following IBM’s Q4 earnings report, with software bookings set to benefit from both new AI service launches and steady renewals of legacy middleware contracts.

IBM’s consulting segment is poised for healthy year-over-year growth in Q4, underpinned by deployment of AI-driven tools and a deepening partnership with Microsoft. By integrating watsonx.ai accelerators into end-to-end transformation projects, consulting revenues are expected to rise materially, offsetting previous concerns around discretionary IT budgets. Management cites multi-quarter increases in large-deal pipeline volume, with several engagements exceeding $50 million in total contract value and durations extending beyond three years.

In December 2025, IBM agreed to acquire Confluent for $11 billion, marking its largest purchase since the Red Hat transaction. This deal brings a fully managed real-time data streaming platform into IBM’s hybrid cloud ecosystem, enabling customers to process and analyze event streams securely across public and private environments. Analysts forecast that the Confluent integration will contribute up to 3 percentage points of incremental revenue growth by fiscal 2027, while enhancing IBM’s competitive positioning against pure-play cloud vendors.