Can IBM's Focus on the Infrastructure Segment Aid the Stock?

Over the years, International Business Machines Corporation’s IBM Infrastructure segment has recorded healthy profit growth, backed by a strong focus on product innovation and the growing adoption of the z17 program, as AI use cases have resonated strongly with clients. The Infrastructure segment includes Hybrid Infrastructure and Infrastructure Support services. Higher investments in the business across areas like AI, hybrid cloud and quantum also buoyed segment performance. 

With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, leading to a healthy demand for the infrastructure services of IBM. 

The buyout of HashiCorp has further augmented IBM’s capabilities to assist enterprises in managing complex cloud environments and complex infrastructure. HashiCorp’s tool sets complement IBM Red Hat’s portfolio, bringing additional functionalities for cloud infrastructure management. The Infrastructure segment's profit was $644 million in third-quarter 2025 compared with $422 million in the year-ago quarter, for respective margins of 18.1% and 13.9%.

Tech Firms Riding on Hybrid Cloud Infrastructure

Amazon.com, Inc. AMZN enjoys a dominant position in the cloud-computing market, particularly in the IaaS space, thanks to Amazon Web Services (“AWS”), which is one of its high-margin-generating businesses. AWS is the world’s most comprehensive and widely adopted on-demand cloud computing platform, serving a large number of business enterprises, government entities and startups. It reportedly offers a wide variety of databases that are purpose-built for different types of applications to enable subscribers to choose the right tool for the job for faster agility at a relatively low cost.

Microsoft Corporation MSFT has doubled down on the cloud computing opportunity. Azure’s increased availability in more than 60 announced regions globally has strengthened Microsoft's competitive position in the cloud computing market. Operating via a massive network of global data centers that ensure high availability and reliability for applications, Azure offers seamless access to all services included in the portal once customers subscribe to it. Subscribers can use these services for creating cloud-based resources, such as virtual machines and databases, which can be assembled into running environments used to host workloads and store data.

IBM’s Price Performance, Valuation and Estimates

IBM has surged 36% over the past year compared with the industry’s growth of 96.9%.

From a valuation standpoint, IBM trades at a forward price-to-sales ratio of 4.05, below the industry tally of 5.02.

The Zacks Consensus Estimate for IBM’s earnings for 2025 has remained stable over the past 60 days.

IBM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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