Does IBM’s Quantum Momentum Justify Its Share Price Surge in 2025?
Thinking about whether to buy, sell, or simply hold onto your International Business Machines shares? You are not alone. When a stock climbs nearly 195% over five years and rockets over 16% in the past month alone, it is natural to wonder what is driving the action and whether it is justified. IBM has been catching lots of attention lately, making headlines for everything from its competitive position in quantum computing to talent moves in the ever-heated race for AI leadership.
Just in the last few weeks, IBM’s name has popped up alongside Google and Microsoft in discussions about a future dominated by quantum machines. That kind of buzz often raises expectations and, as we are seeing, stock prices. With a 31.1% gain year-to-date and a 30.6% jump over the past year, investor optimism seems strong. But is the market running too far ahead of reality, or is IBM simply catching up to where it should be valued?
The short answer, at least for now, is that IBM’s valuation does not exactly scream “undervalued.” When we run the numbers through six major checks, IBM gets a value score of 0, which means it is not judged to be undervalued by any of our traditional benchmarks.
Of course, there is more than one way to size up a stock’s worth. In the next section, we will break down each of these valuation approaches, and at the end, I will show you an even better way to cut through the noise when it comes to assessing IBM’s true value in your portfolio.
International Business Machines scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to present-day dollars. In IBM’s case, the analysis uses a two-stage Free Cash Flow to Equity approach, capturing cash flow estimates from both analysts and longer-term extrapolations.
Currently, International Business Machines reports an annual Free Cash Flow (FCF) of $11.48 Billion. Analyst estimates project this figure to grow steadily, reaching $18.73 Billion by 2029, with intermediary growth supported by both forecast data and model-based assumptions after 2029. For context, analyst consensus goes out five years; projections further into the future are calculated by Simply Wall St based on historical and industry factors.
Based on these cash flow projections, IBM’s estimated intrinsic value is $288.19 per share. Compared to its current trading price, this DCF-based valuation signals that the stock is approximately 0.1% overvalued. This is a difference so small it suggests the stock is trading almost exactly at “fair value.”
Result: ABOUT RIGHT
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for International Business Machines.
IBM Discounted Cash Flow as at Oct 2025
Simply Wall St performs a valuation analysis on every stock in the world every day (check out International Business Machines’s valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.
The Price-to-Earnings (PE) ratio is a go-to metric for valuing profitable companies like International Business Machines, because it boils down a company’s current share price relative to its per-share earnings. It reflects not just current profitability, but also what investors expect in terms of growth and the risks that may be on the horizon.
What determines a “normal” or “fair” PE ratio? It is a balance between how fast investors believe earnings will grow, the stability of those earnings, and how risky the business is compared to broader market and sector peers. High-growth, lower-risk companies usually command a higher PE compared to slower-growing, riskier businesses.
IBM’s current PE ratio sits at 45.86x. For context, this is higher than both the IT industry average PE of 33.17x and the average of its direct peers at 21.85x. While those benchmarks offer helpful perspective, they do not tell the full story.
This is where Simply Wall St’s “Fair Ratio” comes in. The Fair PE Ratio for IBM is calculated at 43.36x, factoring in the company’s specific characteristics, such as its earnings growth, profit margins, market cap, and risk profile. This offers a much more tailored indication of value than industry averages or peer comparisons. That means rather than a broad-brush approach, you are looking at what fits IBM individually.
When you compare the numbers, IBM’s actual PE is 45.86x versus a Fair Ratio of 43.36x. The gap between these two is small, less than 0.10, suggesting the stock is trading at a level that is about right given its fundamentals and outlook.
Result: ABOUT RIGHT
NYSE:IBM PE Ratio as at Oct 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a story you build about a company, powered by your own perspective and assumptions, that connects what you believe about International Business Machines’ future growth and earnings all the way through to a custom estimate of its fair value.
With Narratives, you are not just looking at static numbers or consensus forecasts; you are putting the company’s story at the center of your decision—why it will succeed or struggle—turning your outlook into concrete forecasts for future revenue, margins, and profits. Narratives are available right now in the Simply Wall St Community, a platform used by millions of investors worldwide, making it easy for anyone to share or explore different perspectives.
Narratives help you quickly see whether the Fair Value based on your scenario is above or below the current share price, so you can decide when it makes sense to buy or sell. When news or earnings come in, your Narrative updates automatically to keep pace with new information.
For example, some investors believe International Business Machines could be worth as much as $350 per share if booming AI and high-margin software unlock major growth, while others see more risk and assign a value as low as $198, showing just how much outlooks and therefore Narratives can vary.
For International Business Machines, we will make it really easy for you with previews of two leading International Business Machines Narratives:
🐂 International Business Machines Bull Case
Fair Value: $350.00
Current price is approximately 17.6% below this fair value.
Revenue growth rate: 6.1%
The bullish view focuses on strong adoption of AI, hybrid cloud, and modernization, particularly in regulated sectors, which could drive long-term revenue and increased profitability.
The integration of Red Hat, HashiCorp, and advanced automation has the potential to significantly boost high-margin, recurring software revenue and support gross margin expansion.
Key risks include declines in legacy revenue, competition from hyperscalers and SaaS, disruption from open-source solutions, talent challenges, and a heavy debt load that could limit flexibility.
🐻 International Business Machines Bear Case
Fair Value: $281.32
Current price is approximately 2.5% above this fair value.
Revenue growth rate: 5.1%
The consensus view notes sound progress in hybrid cloud and AI integration driving revenue, though gains appear mostly in line with market expectations and potential macroeconomic risks could impact performance.
Growth in Red Hat OpenShift and generative AI are seen as positive factors, but exposure to discretionary consulting revenue, government contracts, and currency volatility present downside risks.
Overall, the stock is viewed as fairly valued, with balanced prospects and moderate upside limited by industry competition and uncertain economic conditions.
Do you think there’s more to the story for International Business Machines? Create your own Narrative to let the Community know!
NYSE:IBM Community Fair Values as at Oct 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include IBM.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
