Is International Business Machines Corporation (IBM) overvalued or undervalued?
Updated Sep 3, 2026 · hand-researched model · educational, not advice
At a recent price of $231.70, International Business Machines Corporation (IBM) trades 25% above TickerWorth's blended fair value of $174.07 per share — a discounted-cash-flow model cross-checked against peer multiples and asset value — meaning the market currently prices IBM overvalued vs our estimate of what the business is intrinsically worth. Our fair value sits below the market, an implied -24.9% move to close the gap if the business performs in line with our assumptions. This is an educational model, not a price target or a recommendation — the value moves with the inputs, which you can test yourself using the WACC slider below.
The valuation discounts International Business Machines Corporation's projected free cash flows at a weighted-average cost of capital (WACC) of 8.1%, with a long-run terminal growth rate of 2.5%. About 78% of the enterprise value comes from the terminal value — the portion beyond the explicit forecast window — which is typical for a stable, cash-generative business and a reminder that small changes in the discount rate or terminal growth assumption swing the intrinsic value meaningfully.
Running the DCF in reverse — solving for the growth the current price already assumes — the market is implying roughly 9.5% annual revenue growth for IBM. Our base case instead assumes about 3.9% average growth over the forecast, so the market is pricing in materially faster growth than our base case. The reverse-DCF is a quick sanity check: it reframes 'is this stock cheap?' as 'do I believe the growth the price requires?' rather than arguing over a single point estimate of fair value.
Sensitivity matters more than any single number. Across a reasonable band of discount-rate assumptions, IBM's modeled DCF value ranges from about $111.22 to $338.15 per share. If that range still sits below today's price, the market is optimistic relative to the model across the whole band; if it brackets the price, the stock is roughly fairly valued on our assumptions. Use the interactive slider to see exactly where your own cost-of-capital view lands.
How to read this page: the DCF fair value is what International Business Machines Corporation would be worth if its cash flows grow as modeled and are discounted at the stated WACC. The assumptions table shows every input and its source; the reverse-DCF shows what the market believes; the sensitivity band shows how fragile the answer is. None of this is investment advice — it is a transparent, auditable framework for forming your own view of IBM's intrinsic value. Figures update as new filings and prices come in.
The assumptions behind IBM's DCF
| Input | Value | Source |
|---|---|---|
| Base-year revenue | $67,535,000,000 | IBM FY2025 10-K (accession 0000051143-26-000010): us-gaap:Revenues, FY2025. +7.6% vs FY2024 $62,753M (+6% constant currency). Growth was substantially acquisition-driven. UNCHANGED as the base — the DCF grows this figure by forecast.revenue_growth, so the new quarter belongs in the forecast. CROSS-CHECK: H1 2026 revenue was $33,079M, +4.95% on H1 2025. |
| Base EBIT margin | 16.1% | IBM FY2025 10-K (accession 0000051143-26-000010): IBM does NOT tag us-gaap:OperatingIncomeLoss and reports no operating-income line. Derived: gross profit $39,297M - R&D $8,316M - SG&A $20,123M = $10,858M / revenue $67,535M = 16.08%. Cross-check: revenue $67,535M - cost of revenue $28,239M = $39,296M, ties to the tagged gross profit within rounding. This EXCLUDES the ~$1,405M of net other income (IP income, interest income, pension credits) that sits between this line and the $10,328M GAAP pretax figure - excluded deliberately, because interest income is already captured in the net-debt bridge and pension credits are non-cash. CROSS-CHECK ON THE SAME DERIVATION, H1 2026: gross profit $18,857M - R&D $4,485M - SG&A $10,071M = $4,301M / $33,079M = 13.00%, against 12.84% for H1 2025. THE SEASONALITY IS THE POINT AND IT IS LARGE: FY2025's 16.08% is a full year whose second half ran 18.91%. A reader comparing H1's 13.0% with the 16.1% forecast would think the model optimistic; it is not, it is the same shape IBM printed last year. The YoY change in the comparable half is +16bp. |
| Forecast revenue growth | 4% → 4% → 4% → 4% → 3% | Assumption — TickerWorth's 5-year explicit forecast |
| Risk-free rate | 4.7% | US 10Y Treasury constant maturity: 4.67% at 2026-08-27, the latest published observation. Was 4.57% at 2026-07-16. |
| Beta | 0.85 | Assumption — normalized estimate: Published betas cluster 0.67-0.71 (Yahoo 0.68 5Y-monthly, stockanalysis 0.67, Finviz 0.71). Normalized UP to 0.85 - i.e. this override is CONSERVATIVE (raises WACC, lowers value), the opposite of the CAT case. Rationale: a 5-year MONTHLY regression has ~60 observations, so the 2026-07-14 repricing is a single post-event point and is structurally almost absent from the published figure - those betas describe the pre-crash company. Two further distortions: the 2021 Kyndryl spin broke the return series, and IBM's historically defensive high-dividend profile suppresses measured beta relative to a now software/AI-weighted mix. 0.85 sits between the published figure and IBM's longer-run ~0.9-1.0 band. KNOWN REFINEMENT: the rigorous fix is a bottom-up beta unlevered from software/IT-services comparables and relevered at IBM's capital structure; 0.85 is a judgment stand-in for that. Each 0.1 of beta is worth roughly $16/share, and the reverse DCF shows that simply accepting the published 0.675 would close the gap almost entirely. REVIEWED 2026-08-31: the published beta is now 0.705 (was 0.675-0.71). The 0.85 normalization is HELD — it still raises the discount rate and lowers the value. |
| Terminal growth | 2.5% | Assumption — house default: House default 2.5% (roughly long-run nominal GDP), kept for comparability with every other company in this tracker. FLAG: this is generous relative to IBM's own history - revenue went from $57.4B (FY2021) to $67.5B (FY2025), and most of that came from acquisitions, not organic growth. IBM revenue was ~$80B+ a decade ago. A 2.0% terminal rate takes ~$15/share off. Must remain < WACC of 7.86%. |
| Diluted shares | 953M | IBM Q2 2026 10-Q (accession 0000051143-26-000078, filed 2026-07-23): H1 2026 weighted-average diluted shares 952,697,295 (Q2 alone 953,263,534); was 948.7M on FY2025. The diluted count is used rather than the 942.1M outstanding because that is how this model carries SBC dilution — and note the count is RISING: IBM issues more than it retires. |
| Market price | $231.70 | Delayed quote · as of 2026-09-03 05:57 UTC |
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