IBM Stock Has Its Worst Start Since 2002 But Citi Sees 23% Upside From Here

TLDR

• IBM stock has fallen nearly 22% in 2026, its worst start to a year since 2002.
• Citi Research analyst Fatima Boolani initiated coverage with a Buy rating and a $285 price target.
• IBM agreed to pay $17 million to settle a U.S. DOJ probe into its DEI practices.
• The DOJ settlement is the first from its “Civil Rights Fraud Initiative,” launched last year.
• IBM’s quantum computing roadmap includes its most powerful system yet, planned for 2029.

IBM stock is deep in the red in 2026, down nearly 22% year-to-date. That makes it the worst start for the stock since 2002, when it fell 26% over the same stretch. The drop comes as a broader software selloff has weighed on tech names across the board.

International Business Machines Corporation, IBM

Despite the slide, Citi Research analyst Fatima Boolani isn’t walking away. On Friday, she initiated coverage on IBM with a Buy rating and a $285 price target — implying roughly 23% upside from current levels. The stock was trading at $231.25 at the time, down 2.5% on the day.

Boolani’s case centers on IBM’s track record of surviving — and adapting to — major technology shifts. From punch-card machines to personal computers to IT consulting, IBM has reinvented itself more than once. That history, she argues, gives it an “uncanny ability” to stay relevant through each new wave of tech change.

Sticky Customers and AI Positioning

That staying power shows up in IBM’s customer base. Evercore ISI analyst Amit Daryanani raised a similar point last month, pointing out that IBM’s clients have stuck with the company even when they had every chance to move off mainframe systems. That kind of stickiness is hard to price in — but it matters.

Today, IBM’s portfolio spans database systems, developer tools, and multimodal computing environments. Boolani sees this as a strong foundation for AI deployment, arguing that production AI systems will need to be built on top of existing IT infrastructure — exactly where IBM sits.

She also pushed back on fears that AI-native startups could replace enterprise software incumbents like IBM. The company’s deep consulting relationships with large enterprises give it “competitive insulation,” she wrote. In fact, those same AI players might use IBM as a distribution channel to reach enterprise clients.

IBM’s capital intensity is lower than cloud hyperscalers, which Boolani says justifies a more favorable free cash flow multiple. She called the stock’s underperformance versus the broader megacap tech group “punitive,” especially given the profit improvement she expects ahead.

$17 Million DEI Settlement

While analysts were making the case for IBM’s stock, the company was also wrapping up a legal matter in Washington. IBM agreed to pay $17 million to settle a U.S. Department of Justice probe into its diversity, equity and inclusion practices.

The settlement is the first resolution from the DOJ’s “Civil Rights Fraud Initiative,” a unit set up last year to challenge DEI policies using civil anti-fraud law. The government alleged IBM used a “diversity modifier” that linked bonus pay to hitting demographic targets.

IBM denied any unlawful conduct. The agreement states clearly that it is “neither an admission of liability by IBM nor a concession by the United States that its claims are not well-founded.”

IBM said it has already terminated or modified the programs in question.

On the longer-term side, IBM’s quantum computing ambitions remain part of its investment case. The company is on track to deploy its most powerful quantum system in 2029. Boolani called it an “important call option” for long-term investors, noting that IBM’s position in the public sector gives it a strong launchpad in the space.

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