Think It's Too Late to Buy IBM? Here's Why the Best Could Be Yet to Come.

Key Points

• IBM's WatsonX AI platform order book exploded from $2 billion to $7.5 billion in one year.

• Despite gaining 114% in three years, IBM stock still trades at a discount to the average S&P 500 company.

• After years of stagnation, IBM has transformed into a legitimate player in the enterprise AI revolution.

• 10 stocks we like better than International Business Machines ›

Good old International Business Machines (NYSE: IBM) is treading new ground after all these years. On Sept. 23, Big Blue's stock is trading just 8% below the brand-new record highs it reached over the summer.

The thing is, I think this centennial tech titan is just getting started. Here are my top three reasons why it's not too late to buy IBM stock today.

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1. IBM's AI party is just getting started

IBM was a bit late to the artificial intelligence (AI) party, but the company is showing up in style.

The WatsonX generative AI platform had $2 billion of firm orders in the summer of 2024. That order book rose to $7.5 billion by Q2 2025. That figure also excludes IBM's plethora of AI services not named WatsonX, like the Granite platform for cloud-based AI services, IBM's custom AI agents, and the AI-focused version of Red Hat Enterprise Linux (RHEL).

2. A Big, Blue serving of market momentum

As a result of the booming AI sales, IBM's revenues are growing at rates the company hasn't seen consistently since 2011 -- and Wall Street is noticing. The stock has gained 27% over the last year and 114% in three years, though it should be said that Big Blue's stock started from a deeply undervalued position in 2022.

You might see this price chart as a reason to stay away from IBM's soaring stock, but market momentum can be a funny thing. Sometimes it makes sense to buy a surging stock, and IBM falls in that category.

Image source: Getty Images.

3. The stock still looks affordable

You see, IBM's stock still looks cheap, despite recent overperformance. Shares are changing hands at the perfectly reasonable valuation ratios of 22.7 times forward earnings (forward P/E) and 20.7 times trailing free cash flow (P/FCF). The average S&P 500 (SNPINDEX: ^GSPC) stock sports a forward P/E ratio of 24 and P/FCF of 29.9. This red-hot AI stock isn't exactly on fire sale anymore, but it's a significant discount to IBM's long-term business prospects.

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Anders Bylund has positions in International Business Machines. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool has a disclosure policy.