JPMorgan Upgrade Boosts IBM Shares on AI and Software

IBM shares climbed nearly 5% in premarket trading after JPMorgan upgraded the stock to Overweight from Neutral and raised its price target to $291 from $270, citing stronger software momentum and rising demand for artificial intelligence technologies.

JPMorgan analyst Brian Essex upgraded the rating and wrote that growing confidence in IBM’s software business and expectations for software acceleration in the second half of 2026 strengthened the firm’s outlook. The firm pointed to Red Hat activity and migrations to OpenShift as drivers of enterprise adoption for IBM’s AI-focused container platform. JPMorgan also highlighted automation demand following IBM’s acquisition of HashiCorp and said company management reports increasing support from senior corporate executives.

JPMorgan noted software now represents about 45% of IBM’s revenue while generating roughly two-thirds of consolidated profit. The analysts wrote that the shift to software is positive because software delivers higher margins, ratable revenue, improved cash conversion and a higher-quality earnings stream that supports a higher valuation than hardware and services. JPMorgan added that if IBM becomes a significant beneficiary of rising AI demand, the stock could see further valuation expansion.

Separately, Morgan Stanley raised its price target on IBM to $267 from $225 while maintaining an Equal Weight rating. The bank cited recent results from Dell Technologies and Hewlett Packard Enterprise showing stronger-than-expected enterprise server demand driven by compute shortages, hardware refresh cycles and growing AI infrastructure needs. Morgan Stanley said Wall Street expectations for 2026 and 2027 appear low and increased its 2026-27 earnings-per-share estimates by about 5% to 6% for firms exposed to computing demand.

The analyst notes arrived as IBM continues a multiyear transition from hardware and services to a software-led platform focused on hybrid cloud and AI. CEO Arvind Krishna attended a White House event where President Donald Trump signed two executive orders aimed at accelerating domestic quantum computing development and moving federal systems to post-quantum cryptography by 2031. One order directs development of “the first-ever quantum computer powerful enough for scientific research,” with the goal of locating the system in a national laboratory by 2028. Michael Kratsios, the president’s senior science and technology advisor, wrote that Trump had prioritized quantum alongside AI and nuclear energy in a 2025 letter.

JPMorgan and Morgan Stanley published their notes on Tuesday morning and the stock moved in premarket trading.