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Shares of International Business Machines (NYSE: IBM) rose 13% in the first quarter of 2025, according to data from S&P Global Market Intelligence. The tech veteran's stock has taken a modest hit amid the tariff drama of early April, but remains well ahead of the S&P 500 (SNPINDEX: ^GSPC) market index on a year-to-date basis.
How IBM bucked the market trend in Q1
IBM's chart diverged from the broader market twice in the first quarter.
First, Big Blue reported fantastic fourth-quarter results on Jan. 29. Bottom-line earnings of $3.92 per share beat Wall Street's consensus estimates by $0.12. CEO Arvind Krishna highlighted strong growth in the Red Hat segment, alongside game-changing client interest in the WatsonX generative artificial intelligence (AI) platform.
The list of long-term deals for generative AI products and services stood at $5 billion by the end of the year, up from $3 billion in the previous quarter. Driven by these overarching growth trends, management expected full-year revenue growth to accelerate from 1% in 2024 to approximately 5% next year.
IBM's stock gained more than 14% the next day, backing down to a still-impressive 13% jump at the closing bell.
The second bump came on March 7, where IBM's stock jumped 5.2% on a generally quiet day for the stock market. IBM's biggest news that day was the opening of a cloud computing research center in Romania. This is a joint project with Amazon and its Amazon Web Services (AWS) unit, boosting both companies' access to the thriving European market and local engineering talent.
Any expansion of the IBM-to-Amazon relationship is excellent news for Big Blue, since Amazon relies on this company's consulting services to manage and support AWS contracts around the world.
IBM's patient AI plan is paying off
IBM's tariff tumble hasn't been particularly dramatic, simply following the S&P 500's 9% percentage drop in April.
All told, IBM investors have seen a 20% gain over the last year, while the S&P 500 is back where it started with a 2% drop. IBM's advantage grows larger if you include reinvested dividends, since Big Blue's 3% dividend yield is about twice the average payout across the popular market index.
This company was a bit slow to join the AI market surge, but IBM's enterprise-focused approach to generative AI tools has started to pay off. The stock is still quite affordable even after the recent surge, trading at 3.3 times sales and 17 times free cash flow. If you're looking for a great AI stock trading at a modest price, IBM is one of my top picks right now.