Zacks Article Touts IBM's AI Edge Over Intel, But DeepValue Report Highlights Persistent Growth and Transparency Risks

What happened

Zacks Investment Research published an article on February 16, 2026, positioning IBM as a superior buy to Intel based on stronger estimates, cheaper valuation, and hybrid cloud-AI momentum. This contrasts sharply with the latest DeepValue master report, which rates IBM as a 'POTENTIAL SELL' with high conviction, pointing to Red Hat's growth slowdown to +8% constant-currency in Q4'25 as a critical weakness. The report notes that IBM's AI narrative is heavily skewed toward consulting bookings—over $10.5B of the total $12.5B AI book—a metric being discontinued, reducing investor transparency. Moreover, IBM faces margin pressure from fierce competition, high debt (net debt/EBITDA of 3.1), and ~$600M dilution from the Confluent acquisition, straining free cash flow despite a bullish external narrative. While articles like Zacks may fuel short-term optimism, the underlying fundamentals reveal significant risks that are not fully reflected in the current valuation.

Implication

External praise for IBM's AI and hybrid cloud momentum may temporarily support the stock price, but it does not address core issues like Red Hat's deceleration and reduced KPI transparency. The discontinuation of AI bookings reporting makes it harder to validate AI monetization, increasing reliance on less reliable metrics. With net debt at $53.5B and Confluent adding dilution, IBM's balance sheet is stretched, risking further multiple compression if free cash flow guidance is missed. Red Hat's re-acceleration to mid-teens growth is essential for sustaining valuation, but current high-single-digit prints suggest this is not imminent. Therefore, investors should avoid new positions until there is clear evidence of software-led growth and improved financial discipline, as the current setup offers no margin of safety.

Thesis delta

The new article reinforces the market's optimistic narrative on IBM's AI and hybrid cloud positioning, but it does not shift the fundamental thesis that IBM is overvalued given its growth and transparency issues. Investors should recognize that such external validation may lead to short-term price resilience, but the core risks—Red Hat stagnation, consulting-heavy AI mix, and debt-funded M&A—remain unchanged and warrant a cautious approach.