Why IBM Stock Looks Like a Very Promising Long-Term Pick

IBM (IBM) last month delivered weaker-than-expected financial results for the second quarter as its customers reduced their spending on some of IBM's offerings in order to buy more AI products that the tech giant doesn't offer. But as I've said previously, the company can benefit a great deal from its innovations in cybersecurity and quantum. Big Blue has made moves in both of the latter sectors that should enable it to meaningfully increase the amount of revenue that it generates from these categories over the longer term. 

Further, these positive actions bolster my already strong confidence in IBM's CEO, Arvind Krishna. Also importantly, Big Blue remains well-positioned to meaningfully benefit from the continued AI Boom, and in the AI space, the firm recently disclosed that it was partnering with Nvidia (NVDA) and GPU-focused AI infrastructure provider Together AI to develop an AI model. The deal may very well prove to be quite beneficial for IBM.

Finally, the valuation of IBM stock is attractive. Considering all of these points, longer-term value investors should look into the possibility of buying IBM stock. But let's dig into more of the details.

Very Promising Moves in Cybersecurity and Quantum

Earlier this year, IBM invested $32 million in start-up Orion Security. Orion “develops AI-driven contextual data security solutions.” More specifically, the start-up, according to IBM, uses AI to “protect sensitive data across endpoints, (software-as-a-service) and cloud environments with far less complexity (and far greater precision) than legacy approaches.” With many companies and governments looking for efficient ways to protect their valuable data from hackers utilizing AI, Orion's solution sounds very promising. The investment will likely enable IBM to harness Orion's technology at favorable prices and resell it at high margins to many of its customers.

Also in the cybersecurity area, IBM in May disclosed that it would allocate $5 billion “to help find and fix vulnerabilities in open-source software packages used throughout the business world.” Again, the strong demand among enterprises for protection from AI-armed hackers should make this initiative quite profitable for IBM.

In the quantum space, IBM recently reported that, in combination with the error-mitigation software of a start-up called Qedma, it had used quantum “to explore the physics of materials beyond the capabilities of state-of-the-art classical simulations, including those run on one of the world's most powerful supercomputers.” IBM added that the milestone “could lead to better and ultrafast optoelectronics, light-induced superconductors, and other advanced materials applications.” To the extent that IBM's quantum technology enables scientists to conduct experiments more quickly than competing firms and helps companies develop better products than the competition, its quantum business is likely to be meaningfully differentiated and become quite huge.

IBM's CEO Is a Winner

With Krishna at the helm of IBM since April 2020, the revenue generated by its Red Hat open-source software has jumped, while its overall earnings per share surged from $6.23 in 2020 to $11.17 in 2025, and its share price advanced from around $100 when Krishna was promoted to CEO to well over $200 now. Further, the company has become a major player in AI and seems well on its way to being a leader in the quantum space.

Likely to Continue Benefiting From AI

Amid the AI Revolution, Red Hat continues to grow rapidly. Last quarter, Red Hat's sales advanced 11% versus the same period a year earlier. Moreover, data-streaming platform provider Confluent, which IBM acquired earlier this year, should become widely used as a means of quickly and efficiently providing data to AI models and agents. And as I noted earlier, IBM is teaming with Nvidia and AI service provider Together AI to develop an AI inference system. 

Although there's a great deal of competition in the AI inference space at this point, IBM can still generate needle-moving revenue and profits from the initiative in the longer term.

Valuation and the Bottom Line on IBM Stock

The shares have a relatively low forward price-earnings ratio of 19.7x. Given Krishna's strong track record and the company's powerful, positive catalysts, IBM stock is currently cheap, making it a good name for long-term value investors to consider.