Oppenheimer Highlights IBM's Software Pivot as a Growth Play Overlooked by Wall Street

Wall Street hasn't fully caught on to the fact that International Business Machines (NYSE: IBM) is steering hard into software, and according to Oppenheimer, that's a missed opportunity. The firm slapped an outperform rating on IBM with a $360 price target, suggesting about a 24% upside from current levels.

Analyst Param Singh zoomed in on IBM's software-centric evolution, projecting its software segment to grow around 10% annually over the next couple of years. Key drivers include IBM's automation business, which is showing strong momentum, plus a better trajectory from its acquisition, Red Hat, the open-source software specialist. Singh is betting the market's still stuck on the old IBM - the hardware and legacy services side - which doesn't reflect this fresh growth angle.

Consulting revenue tells a complementary story. After underperforming for a while, IBM's consulting arm flipped positive in Q3 2025, thanks to a bounce-back in the applications and business consulting departments. Singh sees consulting growing modestly in the low single digits moving forward. This makes sense given many companies have already spent heavily to set up AI infrastructure and are now gearing toward harnessing that investment through AI applications.

This shift plays to IBM's strengths in engineering and talent. The company is well-positioned to profit from AI application development and ongoing management, creating a recurring revenue stream that also boosts margins. Singh anticipates that this trend will spark deeper engagement with existing clients, fueling an expansion in both gross and pre-tax profit margins.

With these new revenue drivers, the stock could get a fresh multiple re-rating. Singh expects IBM to start trading more in line with other software-heavy tech names rather than legacy infrastructure players. That's a notable shift in how the market values IBM, reflecting its software growth story rather than clinging to past business lines.

IBM's share price has already climbed roughly 32% so far this year, signaling some investor recognition, but Oppenheimer's view is that the best growth chapters are still ahead. The question: will the broader market's attention catch up soon, or is there still room for this pivot to surprise on the upside?