New York, Feb 3, 2026, 11:27 (EST)
- ETFs loaded with IBM shares drew attention following the stock’s sharp move after earnings and a fresh spotlight on its mainframe cycle
- IBM reported a 12% jump in fourth-quarter revenue, hitting $19.7 billion, with infrastructure revenue up 21%
- Following the results, analysts at Bank of America and Bernstein raised their price targets for IBM
IBM shares dropped roughly 7% in late-morning trading Tuesday, reversing last week’s strong earnings-fueled surge. The slide hit ETFs loaded with IBM, dimming their recent appeal.
This matters now since many investors hold IBM via funds focused on dividends, income, and lower-volatility equities—not just broad tech indexes. When IBM moves sharply, those portfolios can shift along with it, often catching people off guard.
This comes amid a tug-of-war over the future of enterprise computing. While some AI budgets are funnelling into public clouds, many large companies stick with private data centres and tightly controlled setups to meet security, compliance, and cost demands.
Zacks Investment Research highlighted five funds where IBM stands as a top holding, naming First Trust NASDAQ Technology Dividend Index Fund and FT Vest Technology Dividend Target Income ETF, both with IBM as their No. 2 holding at 7.81%. The list also features AXS Green Alpha ETF (6.04%), SPDR Portfolio S&P Sector Neutral Dividend ETF (5.71%), and Invesco Dow Jones Industrial Average Dividend ETF (5.40%). Fees on these funds vary from 5 to 100 basis points (one basis point equals 0.01 percentage points). On the analyst front, Bank of America’s Wamsi Mohan raised his target price to $340 from $335, while Bernstein SocGen’s Mark C. Newman upped his to $330 from $280, according to the report.
IBM reported a 12% jump in fourth-quarter revenue to $19.7 billion on Jan. 28, driven by a 14% rise in software and a 21% boost in infrastructure sales, fueled by uptake of its next-gen mainframe platform. “We enter 2026 with momentum,” said Arvind Krishna, as the company projected 2026 revenue growth above 5% on a constant-currency basis, excluding exchange-rate effects, along with roughly $1 billion more in free cash flow after capital expenditures. James Kavanaugh commented that “2025 put IBM’s durability, resilience and differentiation on display.” https://newsroom.ibm.com/2026-01-28-IBM-RE…
But the upbeat call came with a caution. A transcript from Investing.com revealed IBM execs saying Z revenue jumped 48% over the year, marking the highest annual haul for Z in nearly two decades. Still, they expect infrastructure revenue to slip by low single digits in 2026 as product cycles shift. Management flagged cost pressures in server supply chains, highlighting that spot DRAM prices have surged to about six times last year’s level, driven by capacity moving toward AI-focused high-bandwidth memory. Red Hat’s growth also took a hit, slowed by U.S. federal deal delays tied to the government shutdown.
Krishna insisted the mainframe upgrade goes beyond a simple hardware refresh. He highlighted “digital sovereignty”—keeping data and computing within local control—and told investors that “for certain workloads, the mainframe is actually the lowest unit cost economics platform.” He also pointed to IBM’s Spyre AI accelerator, aiming to link legacy systems with today’s AI demands. https://www.datacenterdynamics.com/en/news…
IBM’s hybrid strategy lands it in a packed field. It vies for enterprise software and AI dollars frequently snapped up by Microsoft or Amazon, while Oracle keeps up steady pressure on its database and back-office technology turf.
Commentary has highlighted the irony: what some investors once dismissed as “legacy” tech is now driving growth. The Motley Fool pointed out this week that IBM’s mainframe, known for its security and reliability, is getting a boost from AI-related upgrades. That’s a key reason the company’s infrastructure segment is pulling more weight again. https://www.fool.com/investing/2026/01/31/…
ETF holders now face the question: can IBM sustain software growth as the mainframe cycle fades and newer ventures gain traction? Its dividend remains a staple for income-focused portfolios, yet those funds can amplify price swings when earnings or guidance miss or exceed expectations.
