Bank of America Lowers IBM Stock Target to $310 but Maintains Buy Rating in 2025

It is quite an interesting story of stock in IBM in 2025. In recent news, one of the world largest banks, Bank of America, took the headlines by reducing its IBM price target to $310, but more importantly, they still continued to give it a Buy rating.

Though the quarter was mixed, bottom-line, top analysts have conveyed a very clear message that IBM is at the threshold of transformation, led by its new AI-driven strategy and excellent financials. This update proved significant because it reminded the investors of the relevance to possess a healthy downside in the volatile technical market.

IBM Earnings

On July 23, the earnings of IBM in Q2 2025 were released sending Wall Street into a thought turmoil. The bottom line on the face of it was good: revenues of $17.0b, a year-on-year increase of 8%, accompanied by an adjusted earnings per share (EPS) of $2.80, well above expectations of $2.64.

Gross profit margin is 58.8%, (GAAP) and 60.1% (operating, non-GAAP), whereas free cash flow in the year now is projected to hit above $13.5b. These numbers highlight the fact that the company has surpassed not only the revenue but also the profit consensus estimates, which is unusual in the current market.

But the street was bisected. Why? The company performed well overall but its software group saw just an approximate 10% growth and Wall Street expected about $40m more, which it recorded just $7.39b rather than the projected $7.43b.

Spending on consulting had increased steadily by a moderate 3%, and though spending on infrastructure had shot up 14%, as demand exploded on the new AI-enabled z17 mainframe, shareholders wanted more of the now most profitable and fastest-growing division: software.

Analyst Drop

This is a deep-seated confidence as the bank of America recommends a Buy rating with a price target reduced slightly to $310. One point that Wamsi Mohan, the analyst has to make is the fact that IBM has been able to position itself higher into the food chain to more lucrative software and that its current financial structure is so sound that they can maintain their bullish stance.

Future growth is strongly expected to be catalyzed by the upcoming technologies in the likes of the z17 mainframe and AI acceleration Spyre cards. Notably, the tighter strategy at IBM on building high value recurring revenues and cost control will likely continue and increase market share in cloud and enterprise computing.

With this said, the market has grown to be impatient. IBM has moved into the back half of the year in what an analyst has termed a “show me” story in the latter half of the year on software. Investors will want to see evidence that high-margin AI-driven software can accelerate quickly: now, IBM has as its rivals small, fast-moving upstarts as well as entrenched mega-players.

The AI Revolution: Watson x and Mainframes

IBM isn’t just another tech giant racing to dominate AI. Instead of competing with hyperscalers or building the biggest models, it’s focused on helping enterprises adopt AI in a more coordinated and practical way. IBM is helping large enterprises integrate high-value settings with regulated conditions, governance, hybrid cloud, and ready-made arrangements.

Its Watsonx platform is the pivot, as it can offer tooling to enable the creation, governance and management of AI at any point in the enterprise data life cycle, along with the thriving hybrid cloud business of Red Hat. The z17 mainframe, which includes AI inference, saw a 70% uptake (reported) and is assisting to push advantages straight to infrastructure through AI workloads, something its competitors (e.g., only cloud, and only raw language model energy) lack.

Generative AI of IBM continues to grow with Q2 crossing the line to $7.5b, up 25% compared to last quarter as a direct result of the fact that clients are moving beyond AI pilots to industrialized, scalable implementations which deliver cost savings and efficiency all around the world.

Metric	Q2 2025 Value	YoY Growth
Revenue	$17.0b	+8%
Adjusted EPS	$2.80	+15%
Free Cash Flow	$2.8b (Quarter), >$13.5b (2025E)	+$0.2b YOY
Software Rev.	$7.39b	+10%
Red Hat Growth	+16% (Quarter YOY)	N/A
Infrastructure	$4.1b	+14%
AI Business	$7.5b	Up from $6b in Q1
Gross Margin	58.8% – 60.1%	Up 200+ bps

The trigger?

On results day the IBM stock tumbled despite beating the earnings. The rationale: expectations have been raised on the concept of AI and software at the company and when a seemingly trivial shortfall in a forecast occurs with any software line it causes cold sweat to run down the spine of analysts and investors. Very few can afford to be soft when the spoils are the command of the most profitable, quickly expanding area in the tech arena. Ives wrote to clients early Thursday.

“We believe that IBM is well-positioned to capitalize on the current demand shift for hybrid and AI applications with more enterprises looking to implement AI for productivity gains and drive long-term profitable growth,”

What to Watch?

What will happen to IBM? It will depend on its ability to evidence continued steadily increasing growth, in both high margin AI, and software products. Analysts are hopeful and have quoted:

• Still very solid when it comes to infrastructure, and as more big-name businesses transform to z17 mainframes and generative AI systems. Rapid growth of the Watsonx platform, its contribution to the recurring revenues, and the role of Red Hat, allowing IBM to be positioned as an architect of enterprise AI rather than another party, can be viewed.
• Jump in free cash flow projections, which instills confidence in investors that it is a cashflow-positive defensive technology play. IBM needs to deliver the goods. With AI budgets being shifted to main operations and the number of ad-hoc pilots collapsing to a mere 6%, the future is with those that can deliver enterprise-ready, governable and scalable AI.

What’s Next?

IBM is at a stressed point. Its firm Q2 performance was not smoke and mirror. Nevertheless, the following quarters are going to be decisive. Is it possible that IBM may translate its AI First maxims and cross-mix cloud breakthroughs into a long-term software high-growth?

Today, Bank of America and some of the best analysts in the business look to be approaching this as a yes, and they are guiding that view to the price target of $310, although this may not look so good in the short term.

The opportunity is massive now that the enterprise customers have begun to scale industrial AI and platforms provided by IBM understand the demands of real-world business. It can be possible that 2025 will be remembered as the year when IBM had bet on the future of technology, maybe more than ever before.