Why Stifel Says International Business Machines (IBM) Remains a Top Large-Cap Defensive AI Stock

International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Making Waves on Wall Street. On January 29, Stifel analyst David Grossman raised the price target on the stock to $340 from $325 while maintaining a Buy rating. IBM remains top large-cap defensive pick, with analysts highlighting its FCF beat, robust software growth, and 2026 PTI guide.

IBM’s fourth-quarter 2025 were in-line or slightly above consensus expectations, with 7% organic revenue growth and 15% earnings per share growth. The firm noted that adjusting for the planned inclusion of Confluent, anticipated to close in mid-2026, the company’s 2026 revenue/margin guidance was largely inline with software growth and assumed to accelerate as year progresses.

Stifel noted that the key surprise in the quarter was IBM’s $0.7bn, or 10%, 4Q25 FCF outperformance and 2026 FCF guidance also came in $0.7bn (4–5%) above consensus. It added that an unexpected Q4 rebalancing charge also explains some of the outperformance.

IBM shares rose after-market hours, a reflection of its FCF outperformance, robust software performance, and weakness leading into the report.

“IBM is now trading at ~35% premium to equal-weight S&P500, in-line with LTM trend. While we wouldn’t chase the stock, it remains our top large-cap defensive pick.”

International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.

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Disclosure: None. This article is originally published at Insider Monkey.