New York, Jan 29, 2026, 15:10 EST — Regular session.
- IBM shares jumped roughly 3.3% following better-than-expected quarterly results.
- The gain stood out amid a tough day for software stocks, with investors uneasy about heavy AI investment and uncertain payback periods. 1
- IBM’s Red Hat growth and the threat of another U.S. government shutdown resurfaced after management revealed a recent drop in bookings. 2
Shares of International Business Machines (IBM) climbed in Thursday afternoon trading, maintaining some of the gains sparked by Wednesday’s earnings report. This move went against the wider tech sector selloff.
IBM climbed roughly 3.3% to $304.01, after reaching as high as $323.78 earlier. The stock started the day strong but lost some momentum as trading progressed.
The shift was significant as investors remain anxious over whether big bets on artificial intelligence will yield profits soon. Microsoft’s drop following a cloud update weighed on the software sector, though IBM bucked the trend, at least for the moment. 1
IBM stands out as one of the rare major U.S. tech companies whose earnings offer a glimpse into enterprise budgets outside the hyperscalers. Investors are grappling with what “AI demand” really means once the hype dies down and the bills come due.
IBM reported late Wednesday that its fourth-quarter revenue jumped 12% to $19.7 billion, with adjusted earnings hitting $4.52 per share. CEO Arvind Krishna highlighted that IBM’s generative AI “book of business” has surpassed $12.5 billion. The company also projected revenue growth above 5% in 2026 on a constant-currency basis, excluding currency fluctuations. IBM declared a quarterly dividend of $1.68 per share. 3
That said, not everything looked strong beneath the headline beat. Red Hat, IBM’s hybrid-cloud arm, saw growth slow to 10% this quarter. CFO Jim Kavanaugh pointed to the lengthy U.S. federal government shutdown late last year as a factor that hurt bookings. He told Reuters the federal government makes up about 15% of Red Hat’s hybrid-cloud bookings, and the shutdown trimmed “a couple” of points off growth. IBM also said it will no longer report its “AI book of business” separately starting in Q1.
The company has been stepping up its deal-making to boost its software portfolio, including the $6.4 billion acquisition of HashiCorp and the planned $11 billion purchase of Confluent. On the post-earnings call, Kavanaugh said IBM anticipates around $600 million in dilution by 2026 linked to the Confluent deal, mostly due to stock-based compensation and interest expenses. 2
IBM’s rise came amid a heated debate in the market. Some investors view the recent surge in AI spending as a competitive edge, while others worry it’s squeezing margins—particularly for software companies dependent on costly cloud partners and heavy compute resources.
“Microsoft disappointed, raising real worries that AI investments could undercut software companies,” said John Praveen, managing director and co-CIO at Paleo Leon, highlighting a wider move to trim risk in equities. 1
IBM’s main concern isn’t just missing the quarter—it’s losing momentum. If Red Hat continues to slow down, or if another standoff over U.S. budget talks pushes federal IT projects back, the company’s profitable segments might take a hit. On top of that, costs tied to integrating and financing large acquisitions add another layer of uncertainty.
Investors are keeping an eye on Washington as Congress races to pass spending bills before the midnight Friday deadline. Failure to do so could lead to a partial U.S. government shutdown—something IBM has already tied to its recent struggles in hybrid-cloud performance. 4
