Is It Time to Buy the Best-Performing Dow Stock of 2025?

It was a tough week for the Dow Jones Industrial Average ($DOWI), as Walmart (WMT) collapsed on a conservative full-year forecast and UnitedHealth (UNH) was punished on reports of a Justice Department investigation. However, one Dow stock now stands out as the 30-member index’s best performer of the year: IBM (IBM).

IBM Stock is a Standout

IBM stock has demonstrated remarkable resilience in early 2025, achieving a 19% year-to-date gain and outperforming many of its technology sector peers - including Dow giant Nvidia (NVDA), which is roughly flat on the year.

Big Blue’s rally has been largely driven by its successful artificial intelligence (AI) initiatives and software-focused transformation. IBM's software segment exhibits particularly promising growth potential, with strong adoption rates of Red Hat Enterprise Linux and OpenShift technologies contributing significantly to this momentum. 

The launch of new AI Integration Services marks a strategic move to capitalize on enterprise demand for artificial intelligence solutions, reinforcing IBM's footprint in this key growth industry.

IBM is Still a Turnaround Play

While the consulting business segment is projected to achieve modest low-single-digit growth, followed by positive inflection anticipated in the second half of 2025, the company's broader transformation into a software-centric model is viewed as a crucial driver for long-term value creation. IBM's recent success in securing significant contracts, like the ₹297 crore deal with Can Fin Homes for core business solutions, demonstrates its continued strength in enterprise services.

The company's strategic initiatives, however, are not without challenges, as evidenced by the implementation of a controversial return-to-office policy requiring three days of in-office presence weekly. But on balance, market confidence in IBM's balanced approach of maintaining traditional tech services while pursuing AI innovation continues to grow. 

Is IBM a Good Buy?

IBM sports a healthy profit margin of 9.6% and an impressive return on equity of 39%, and the forward adjusted price-to-earnings (P/E) ratio of 24.69 suggests the stock is reasonably valued at current levels. 

Looking forward, analysts project steady earnings growth, with estimates showing an expected increase from $10.78 per share in 2025 to $11.60 in 2026, indicating continued business expansion. 

Plus, Wall Street could be coming around on IBM stock, after a long period of indifference. The consensus rating on IBM just climbed to a “Moderate Buy,” up from “Hold” last month.