DCF Studio

    IBM · NYQ · Technology

    International Business Machines Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 167.02

    Market price

    USD 252.51

    Implied upside

    -33.9%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    Value Per Share

    Perpetuity growth
    USD 167.02-33.9%
    Exit multiple
    USD 229.10-9.3%
    Market price
    USD 252.51

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn6bn13bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 70.6bnUSD 73.2bnUSD 75.9bnUSD 78.5bnUSD 81.1bnUSD 83.7bnUSD 86.2bnUSD 88.6bnUSD 90.9bnUSD 93.2bn+3.1%
    EBITUSD 11.2bnUSD 11.6bnUSD 12.0bnUSD 12.4bnUSD 12.8bnUSD 13.2bnUSD 13.6bnUSD 14.0bnUSD 14.4bnUSD 14.7bn+3.1%
    NOPATUSD 9.6bnUSD 10.0bnUSD 10.4bnUSD 10.7bnUSD 11.1bnUSD 11.4bnUSD 11.8bnUSD 12.1bnUSD 12.4bnUSD 12.7bn+3.1%
    Add depreciation & amortisationUSD 5.3bnUSD 5.5bnUSD 5.7bnUSD 5.9bnUSD 6.1bnUSD 6.3bnUSD 6.4bnUSD 6.6bnUSD 6.8bnUSD 7.0bn+3.1%
    Less capital expenditureUSD -2.0bnUSD -2.5bnUSD -3.0bnUSD -3.5bnUSD -4.0bnUSD -4.6bnUSD -5.2bnUSD -5.8bnUSD -6.5bnUSD -7.1bn+15.0%
    Capex, % of revenue2.9%3.4%3.9%4.5%5.0%5.5%6.1%6.6%7.1%7.6%-
    Less increase in working capitalUSD -203.9mUSD -179.7mUSD -178.6mUSD -176.9mUSD -174.5mUSD -171.5mUSD -167.8mUSD -163.5mUSD -158.6mUSD -152.9m-3.1%
    Free cashflow to firmUSD 12.7bnUSD 12.8bnUSD 12.9bnUSD 12.9bnUSD 12.9bnUSD 12.9bnUSD 12.8bnUSD 12.7bnUSD 12.6bnUSD 12.4bn-0.2%
    Discount factor0.96370.89490.83100.77170.71670.66550.61800.57390.53300.4949-
    Present valueUSD 12.2bnUSD 11.5bnUSD 10.7bnUSD 10.0bnUSD 9.3bnUSD 8.6bnUSD 7.9bnUSD 7.3bnUSD 6.7bnUSD 6.2bn-
    Present Value Of The ForecastUSD 90.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.842Reported 0.764, pulled toward 1.0 (Blume)
    Cost of equity8.46%Risk-free + beta x equity risk premium
    Cost of debt5.59%Risk-free + 70bp, the spread for a A+ rating at 6.5x interest cover. Book interest / average debt was lower, at 3.1%.
    Market capitalisationUSD 238.7bn78.7% of capital
    Total debtUSD 64.6bn21.3% of capital, book value as a proxy
    Tax rate13.5%Effective, capped at statutory
    WACC7.68%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 167.02

    57% of EV

    Forecast FCFF, final year
    USD 12.4bn
    Capex at depreciation, working capital in reinvestment
    USD 15.9bn
    Less reinvestment at g/ROIC (24.0% of NOPAT)
    USD -3.8bn
    Capitalised
    USD 12.1bn
    ROIC (reported)
    10.4%
    Terminal value, undiscounted
    USD 239.0bn
    Terminal value, discounted
    USD 118.3bn
    Enterprise value
    USD 208.6bn
    Less net debt
    USD 50.2bn
    Equity value
    USD 158.5bn

    Exit at 16.5x EBITDA

    Value per shareUSD 229.10

    66% of EV

    Terminal value, undiscounted
    USD 358.0bn
    Terminal value, discounted
    USD 177.2bn
    Enterprise value
    USD 267.5bn
    Less net debt
    USD 50.2bn
    Equity value
    USD 217.4bn

    Spread between methods: 31%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.68%261.63274.99293.20318.97357.50
    6.68%203.10208.27215.14224.42237.23
    7.68%163.44164.91167.02169.99174.11
    8.68%134.76134.43134.33134.52135.09
    9.68%113.05111.81110.62109.51108.50

    Outlined: this model. Green text: above today's price of 252.51. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year3.7%3.3%7.3%
    EBIT margin18.5%15.8%23.6%
    Discount rate-7.7%6.1%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.