IBM vs Microsoft Stock in December 2025: Which AI Powerhouse Looks Like the Better Buy After IBM’s $11 Billion Confluent Deal?

Published: December 8, 2025 – data and prices cited are as of intraday trading on this date.

Key takeaways

IBM (IBM) just announced an $11 billion cash deal to acquire Confluent, a major real‑time data streaming platform, to build a “smart data” foundation for enterprise generative and agentic AI. ^[1]
Microsoft (MSFT) continues to dominate large‑cap tech, with a market cap around $3.85 trillion, strong cloud and AI growth, and a broad “Strong Buy” consensus from Wall Street with roughly 28–30% implied upside from current levels. ^[2]
IBM has quietly turned into a top‑performing dividend‑ and AI‑recovery play in 2025, with year‑to‑date total returns near 45%, a dividend yield around 2.2%, and a growing AI “book of business” already at $9.5 billion. ^[3]
Microsoft offers lower current yield (~0.7–0.8%) but faster earnings and dividend growth, supported by Azure growth near 30–40% and rapid AI monetization via Copilot and AI infrastructure. ^[4]
On valuation, both stocks trade at premium P/E multiples in the mid‑30s, but Microsoft’s growth profile and analyst upside are meaningfully stronger, while IBM’s recent rally now prices in a lot of its turnaround story. ^[5]

Market snapshot on December 8, 2025

As of late trading on December 8, 2025:

IBM (NYSE: IBM)
- Price: roughly $309–311 per share after initially spiking on the Confluent news. ^[6]
- Market cap: about $289 billion. ^[7]
- YTD total return: ~44–45%, comfortably ahead of the S&P 500. ^[8]
- Dividend yield: ~2.2%, with 30 consecutive years of dividend increases. ^[9]
Microsoft (NASDAQ: MSFT)
- Price: around $490–492 per share on Dec. 8, 2025. ^[10]
- Market cap: approximately $3.85 trillion, keeping it near the very top of global equity markets. ^[11]
- YTD total return: about 17%, ahead of the S&P but far behind IBM’s 2025 surge. ^[12]
- Dividend yield: roughly 0.7–0.8%, with double‑digit annual growth and a 20‑year dividend growth streak. ^[13]

Meanwhile, broader markets are trading cautiously as investors wait for this week’s Federal Reserve decision, keeping macro conditions in focus for both tech heavyweights. ^[14]

Today’s big story: IBM goes all‑in on data streaming with Confluent

The headline driver for IBM stock on December 8, 2025 is clear:

IBM has agreed to acquire Confluent in an $11 billion all‑cash deal at $31 per share, a roughly 34% premium to the target’s last close. ^[15]

What IBM is buying

Confluent is a leader in real‑time data streaming built around Apache Kafka, with more than 6,500 customers and a central role in moving and governing event data for modern applications. ^[16]

For IBM, the logic is straightforward:

AI needs clean, real‑time data: Confluent’s streaming platform is crucial for feeding generative and agentic AI systems with up‑to‑date transactional data, logs, and events. ^[17]
Fits IBM’s hybrid cloud strategy: The company has already spent heavily on Red Hat and HashiCorp to build out its hybrid cloud stack; Confluent slots into the data layer of that stack. ^[18]
Financially accretive over time: IBM expects the deal to be accretive to adjusted earnings in the first full yearafter closing and to boost free cash flow in year two, with closing targeted for mid‑2026. ^[19]

This move comes on top of a very strong Q3 2025:

Revenue of $16.33 billion, up ~9% year‑over‑year, modestly ahead of consensus. ^[20]
Infrastructure (including IBM Z mainframes) revenue up about 17%, helped by the new AI‑enabled z17 cycle. ^[21]
IBM’s AI “book of business” has grown to around $9.5 billion and continues to expand. ^[22]
Management raised its 2025 full‑year revenue growth target to “>5%” and expects roughly $14 billion in free cash flow. ^[23]

In short, IBM is making a big, high‑conviction bet that data streaming will be the backbone of enterprise AI — and is using its improved cash generation to pay for it.

Microsoft’s day: steady AI momentum and chip headlines

While IBM is grabbing merger headlines, Microsoft’s story on December 8, 2025 is more about steady execution and incremental news flow.

AI and cloud growth still driving the thesis

Microsoft’s fiscal 2025 numbers show why it’s still the default AI blue‑chip for many investors:

FY25 revenue reached about $281.7 billion, up 15% year‑over‑year. ^[24]
Operating income climbed 17% to $128.5 billion. ^[25]
Azure and other cloud services grew nearly 34–39%, pushing Microsoft Cloud and the Intelligent Cloud segment to ~25–27% growth in the most recent quarter. ^[26]

These results reflect:

Rapid adoption of Copilot across Office, GitHub and Windows. ^[27]
A surge in AI infrastructure demand, with Microsoft adding more than 2 GW of new data center capacity over the past year. ^[28]

Today’s chip and analyst news

On the chip side, multiple reports today highlight that Microsoft is in advanced talks with Broadcom to co‑design custom AI chips, a move seen as diversifying away from a sole dependence on Nvidia and its in‑house Athena parts. ^[29]

Analysts continue to lean bullish:

A recent Seeking Alpha note casts Microsoft as a “future dividend aristocrat”, emphasizing its strong AI‑driven earnings growth and still‑reasonable valuation. ^[30]
Jefferies and other brokers this week have reiterated Buy ratings, citing robust remaining performance obligations (RPO) and strong demand for Copilot and AI services. ^[31]

Alongside this, new pieces today (including a 24/7 Wall St. forecast) project continued upside for MSFT through 2030, underscoring Wall Street’s confidence in its long‑term AI monetization. ^[32]

Valuation check: premium multiples for both

IBM: “value” label, growth multiple

IBM has historically been treated as a slow‑growth value/dividend stock, but after the 2025 rally and AI narrative shift, it no longer looks “cheap” on traditional metrics:

P/E ratio (TTM): roughly 36x based on several current data providers, well above its ~25x 10‑year average. ^[33]
Price‑to‑sales: around 4.4–4.5x, also elevated versus its own history and typical IT services peers. ^[34]

Given IBM’s guidance for >5% annual revenue growth and a mid‑single‑digit to high‑single‑digit EPS growth trajectory, the stock now trades on a growth‑stock multiple that assumes successful integration of Confluent and continued AI traction. ^[35]

Microsoft: paying up for quality growth

Microsoft’s valuation is rich but somewhat more aligned with its growth rate:

P/E ratio (TTM): approximately 36–37x. ^[36]
Price‑to‑sales: generally in the 11–12x range, reflecting its superior margins and growth, though exact figures vary by source. ^[37]

With:

High‑teens revenue growth,
~30%+ operating margins,
And a significant runway in AI services, cloud infrastructure and productivity software,

many analysts argue that Microsoft’s multiple is defensible for a mega‑cap with this growth and profitability profile. ^[38]

Income profile: slow‑growing IBM vs fast‑growing Microsoft dividends

IBM: income first, growth second

IBM remains the income‑oriented name in this matchup:

Trailing annual dividend: about $6.70 per share. ^[39]
Yield: roughly 2.2%, comfortably above Microsoft and somewhat above the S&P 500. ^[40]
Dividend growth streak: 30+ years, qualifying IBM as a dividend aristocrat in many classifications. ^[41]
Payout ratio: ~79–80% of earnings, relatively high but manageable if free cash flow hits the $14B target. ^[42]

Analysts and commentators increasingly frame IBM as a “quiet AI winner” with a dependable dividend, though some caution that the elevated payout ratio and ambitious M&A program limit room for aggressive dividend growth. ^[43]

Microsoft: low yield, high growth

Microsoft’s dividend strategy is the opposite: low yield, high growth.

Annual dividend: about $3.64 per share, after a recent increase. ^[44]
Forward yield: roughly 0.7–0.8% at current prices. ^[45]
Growth: around 10% per year over the past decade, with another 10% bump announced for the December 11, 2025 payment. ^[46]
Payout ratio: roughly 25% of earnings, leaving ample room for reinvestment and future dividend hikes. ^[47]

Income‑oriented investors looking for current cash flow might favor IBM; those who value dividend growth and balance sheet flexibility may prefer Microsoft.

What Wall Street says: forecasts and ratings

IBM: cautious optimism after the run

Despite IBM’s strong 2025 performance, analysts are more measured on its upside from here:

StockAnalysis shows 13 analysts with a consensus rating of “Buy” and an average 12‑month price target near $292, implying mid‑single‑digit downside from today’s price after the rally. ^[48]
TipRanks data for the last three months shows roughly 18 Buy, 7 Hold, and 2 Sell ratings, with an average price target around $300–301 per share, or essentially flat to modestly lower from current levels. ^[49]
Recent notes have highlighted IBM’s improved AI and cloud positioning and upgraded ratings (e.g., Erste Group and RBC), but they also flag execution risk and a now “full” valuation. ^[50]

In other words: Wall Street mostly likes IBM’s strategy but thinks the stock already reflects much of the turnaround story after its near‑50% market‑cap increase over the past year. ^[51]

Microsoft: broad‑based Strong Buy with clear upside

Microsoft’s analyst picture is much more unambiguously bullish:

StockAnalysis: 33 analysts rate MSFT a “Strong Buy”, with an average price target around $628, implying about 28% upside. ^[52]
Yahoo Finance and Investing.com paint similar pictures: ~$625–626 average 12‑month target, with lows near $483 and highs around $730, and a consensus rating of “Strong Buy.” ^[53]
Several recent articles and notes today highlight Microsoft as a core AI holding with ongoing upside from Copilot monetization, datacenter expansion, and strategic chip moves. ^[54]

So while IBM’s near‑term targets cluster around current levels, Microsoft’s consensus view still sees meaningful double‑digit upside from today’s price.

Risk profile: where things can go wrong

Key risks for IBM

Integration risk with Confluent
A large acquisition always carries operational and cultural integration risk. If IBM struggles to retain Confluent’s talent or to cross‑sell its platform into IBM’s installed base, the expected AI and cloud synergies may lag. ^[55]
Valuation risk after a big run
IBM now trades at a P/E in the mid‑30s, well above its 10‑year average and more in line with higher‑growth software peers. If AI or cloud growth disappoints, multiple compression could hit returns even if earnings continue to grow. ^[56]
High payout ratio
With a dividend payout near 80% of earnings, IBM has less buffer if free cash flow falls short or if future acquisitions require more cash. ^[57]

Key risks for Microsoft

Regulatory and antitrust scrutiny
As one of the world’s largest companies and a central platform in AI, cloud and productivity software, Microsoft faces ongoing regulatory risk in the U.S. and EU, especially around competition and data privacy. ^[58]
AI monetization expectations
The stock’s multiple already assumes sustained double‑digit growth from AI and cloud. If Copilot adoption or AI workloads slow, or if price competition intensifies, analysts may cut forecasts. ^[59]
Chip and infrastructure dependencies
While custom chip talks with Broadcom reduce reliance on any one supplier, they also add execution risk; delays or performance issues could affect Azure’s AI competitiveness. ^[60]

IBM vs Microsoft: which stock looks more attractive right now?

From today’s vantage point on December 8, 2025, here’s how the matchup looks by investor type:

For AI‑first growth investors

Microsoft is still the clearer choice:
- Stronger top‑line and earnings growth.
- More diversified AI revenue streams (Copilot, Azure AI, enterprise software).
- A more supportive analyst backdrop with clear upside in consensus price targets. ^[61]

IBM is becoming an AI player, but much of its story is still in execution mode — integrating Confluent, scaling its AI “book of business,” and accelerating hybrid cloud growth. ^[62]

For dividend and income investors

IBM offers:
- A much higher starting yield (~2.2% vs ~0.7–0.8%). ^[63]
- A long dividend track record and a reputation as a reliable payer.
Microsoft offers:
- A smaller current yield but more robust dividend growth and a much lower payout ratio, which may compound faster over long periods. ^[64]

Investors who value current income today may lean IBM; those who prioritize growth plus future dividend powermay favor Microsoft.

For value‑conscious investors

Here, the answer is more nuanced:

IBM looks like a turnaround/value name on the surface, but its mid‑30s P/E and big 2025 price move mean you’re no longer getting a classic “value stock” — you are paying a growth multiple for a still‑emerging AI story. ^[65]
Microsoft trades at a similar multiple but with higher growth, more consistent execution, and stronger analyst conviction. From a pure risk‑adjusted growth‑per‑P/E perspective, many would argue MSFT still has the edge. ^[66]

Bottom line

IBM’s Confluent deal is a genuine game‑changer for its AI and data narrative and helps justify part of its big 2025 re‑rating. But it also raises the stakes: IBM must now prove it can integrate and monetize a complex, high‑growth data platform on top of an already ambitious hybrid‑cloud transformation. ^[67]
Microsoft remains the benchmark AI and cloud compounder, with a fortress balance sheet, dominant platforms, and broad analyst conviction that it can continue delivering high‑teens earnings growth from a $3.85 trillion base. ^[68]

For most diversified portfolios focused on long‑term AI‑driven growth, Microsoft still looks like the more straightforward core holding, while IBM is evolving into a more speculative but interesting blend of income and AI‑driven re‑rating.

As always, this article is for informational and educational purposes only and does not constitute personalized investment advice. Before buying or selling any security, consider your risk tolerance, time horizon, and portfolio objectives, or consult a licensed financial professional.