New York, January 29, 2026, 14:06 EST — Regular session underway.
- IBM shares climbed following the company’s stronger-than-expected quarterly results and its reaffirmation of 2026 goals.
- The shift was notable amid a wider selloff in software shares driven by concerns over AI-related disruption.
- Washington budget talks are under scrutiny, with potential impacts on federal spending in play.
International Business Machines Corp shares climbed 3.9% to $305.65 Thursday afternoon, after hitting a session high of $323.78. The jump came after the company’s late-Wednesday earnings report topped estimates and reaffirmed its 2026 outlook.
The bounce is crucial since investors have grown jittery about software, despite the rising demand for AI-related computing. Traders are looking for clear evidence that legacy tech suppliers can capture sales in the AI buildout without being undercut by new rivals.
The broader market provided no relief. Major Wall Street indexes dropped to their lowest levels in more than a week, weighed down by a fresh round of big-tech earnings that stoked concerns over heavy AI investments and unclear returns. Microsoft was hit hard following its cloud update. 1
IBM reported a 12% jump in fourth-quarter revenue, reaching roughly $19.7 billion. Its free cash flow for 2025 came in at $14.7 billion. CEO Arvind Krishna highlighted that IBM’s “generative AI book of business” surpassed $12.5 billion. The company anticipates over 5% revenue growth in 2026 on a constant-currency basis, excluding foreign-exchange effects, along with about $1 billion more in free cash flow compared to last year. IBM also announced a quarterly dividend of $1.68 per share, payable March 10 to shareholders of record on Feb. 10. 2
Software shares took a beating elsewhere as optimism faded. SAP sank over 16% after delivering a weak cloud outlook. ServiceNow dropped 11% following its earnings report. The S&P 500 Software and Services Index slid 8.7%, hitting its lowest point in nine months, according to Reuters. J.P. Morgan analysts noted that “the malaise in software sentiment persists.” Meanwhile, Adam Turnquist of LPL Financial said the market is “pricing a worst-case scenario” for subscription software, or SaaS. 3
Some analysts view IBM’s cash forecast as a buffer, even though the stock isn’t cheap. Evercore’s Amit Daryanani described the 2026 free-cash-flow guidance as “fairly conservative.” BMO Capital Markets’ Keith Bachman called the quarter “reasonable” with a “solid outlook,” but pointed out the valuation remained unattractive. He raised his price target to $350 from $305 while maintaining a Market Perform rating. 4
IBM’s earnings revealed some friction points. Growth at Red Hat, the company’s hybrid cloud division that helps firms manage workloads across private and public clouds, slowed to 10% this quarter. CFO Jim Kavanaugh told Reuters the lengthy U.S. government shutdown late last year knocked “a couple points” off that growth, since federal clients account for roughly 15% of Red Hat bookings. Meanwhile, IBM said it will stop breaking out its “AI book of business” metric starting next quarter. Kavanaugh also highlighted about $600 million in 2026 dilution tied to the $11 billion Confluent deal, mostly from stock-based compensation and interest costs. 5
The upcoming trigger is political, not corporate. U.S. funding for multiple government programs runs out after midnight Friday, Jan. 30. Investors will be focused on whether lawmakers can prevent a partial shutdown that might disrupt federal tech spending once more. 6
