IBM (NYSE:IBM) beat third-quarter expectations as strong performance in its Infrastructure and Automation divisions successfully offset a surprising slowdown in key software segments like Red Hat.

• IBM shares are experiencing downward pressure. Find out more here.

Driven by the success of its z17 mainframe, IBM raised its full-year financial guidance, signaling confidence that it can overcome the weaker-than-expected results from its cloud software business.

BofA Securities analyst Wamsi Mohan maintained a Buy rating on IBM and increased the price target from $310 to $315.

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According to Mohan, IBM reported a clean third-quarter, beating both revenue and earnings per share estimates, but the performance across its business segments was mixed.

The analyst noted that stronger-than-expected results in the Automation and Infrastructure divisions offset weaker performance in Red Hat (Hybrid Cloud) and Transaction Processing software.

Despite the disappointing software mix, which led management to lower its full-year growth forecast for Red Hat, IBM raised its overall 2025 guidance. The company now projects total revenue growth of more than 5%, an expansion in profit margins, and approximately $14 billion in free cash flow.

Mohan viewed the Consulting division’s performance as better than expected, having noted its growing AI book of business that’s expected to drive future growth for both the Consulting and Software segments.

The analyst noted that despite a slowdown in certain software areas, IBM is successfully shifting its business mix toward higher-margin software and services, while generating strong free cash flow.

IBM Price Action: IBM stock is trading lower by 1.17% to $284.16 at publication on Thursday.

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