IBM reports strongest Q1 free cash flow in ten years as Software and Infrastructure grow, but macro pressures weigh on valuation.
IBM shares fell 16% from their January peak to $268.71, despite posting the highest first-quarter free cash flow in a decade. Software revenue rose 11%, while Infrastructure surged 15%, offsetting weak Consulting growth of 1% in constant currency.
The selloff aligns with broader enterprise tech multiple compression driven by Federal Reserve tightening under Kevin Warsh. IBM’s forward P/E stands at 22, below historical averages, as macro pressures overshadow strong fundamentals. The company’s $12.5 billion GenAI book and 31 consecutive dividend increases bolster long-term prospects.
Analysts note the disconnect between IBM’s execution and its valuation, with shares trading near $260 support after peaking at $314.84 in January. The broader market’s grind higher contrasts with IBM’s pullback, creating a potential entry point for investors.