Has IBM Stock Become A Different Bet? Trefis Team Tue, October 13, 2026 at 4:35 PM EDT 3 min read IBM +1.66% ^GSPC -0.02% MSFT +0.43% AMZN -0.37% ORCL +4.23% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Shares of IBM (IBM) currently trade at 19.9 times earnings, while the S&P 500 sits at 21.9. Investors buying at that multiple need to understand the underlying assets, and the company has recently changed its messaging. During the fiscal Q2 2025 call, executives focused on a running total of generative AI business that they defined as their book of business. The most recent presentation offered a different focal point. So what is management talking up instead?
IBM Now Talks Up Recurring Software Revenue
Executives are now framing the company around reliable, repeating software revenue. During the fiscal Q2 2026 call on July 22, 2026, the company noted that about 80% of its annual software revenue is recurring. This division accounts for nearly 45% of total revenue.
A year prior, leadership anchored its pitch to a different metric. During the fiscal Q2 2025 call, the company reported its generative AI book of business stood at over $7.5 billion since inception. That figure climbed from over $3 billion during the fiscal Q3 2024 call. Highlighting a rapidly growing cumulative total gave investors a straightforward view into AI demand.
Generative AI remains part of the conversation. Management noted on the latest call that the technology represented about 50% of quarterly Consulting signings. Yet the company has stopped emphasizing the cumulative tally.
Software Is IBM's Largest Source Of Revenue
The software unit brought in $30.0 billion in fiscal 2025, accounting for 44% of the company's revenue over that period. Sales in the division expanded by 10.6%, compared with a 1.8% growth rate for Consulting, which is the second-largest business segment.
The company also tracks annual recurring revenue. Executives placed that metric at $24.6 billion during the most recent call, representing an 8% increase from a year earlier.
The generative AI metric measured a different type of performance: a cumulative book of business since inception. It never reflected actual yearly sales, whereas recurring software revenue provides an annual baseline.
Is IBM's Turn To Software Good News For You?
This strategic pivot toward software presents a more reassuring than concerning picture for investors, though it comes with a catch. A baseline of repeating revenue offers more stability than a lifetime tally of generative AI business, and this reliable income anchors the largest division at the company.
The complication is that software is also where IBM missed expectations during fiscal Q2 2026. Software revenue grew 5% for the quarter, but its organic growth was flat. Executives noted that tens of large deals failed to close on time, and that about a third of those delayed contracts had finalized by the earnings call.
After the second-quarter shortfall, leadership cut its 2026 software growth forecast to a range of 6% to 8%. Management expressed complete conviction in achieving double-digit software growth over the long term, yet the 2026 forecast is short of that mark.
Software revenue growth against that 6% to 8% guidance remains the number to watch heading into the fiscal Q3 2026 report.
Does This Mean You Should Act On IBM?
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