IBM’s new AI mainframe could boost sales cycle, BofA analysts say

Investing.com - IBM ’s new z17 artificial intelligence mainframe could underpin a strong sales cycle for the tech group, according to analysts at BofA.

Earlier this month, IBM unveiled the z17, calling it the "next generation" of its key mainframe offerings that will feature AI capabilities across hardware, software, and systems operations.

The z17 is due to be made available from June 18, IBM said. It added that its Spyre accelerator chip, which aims to bring generative AI capabilities to the mainframe, will also be open to the public in the fourth quarter of this year.

In a note the clients, the BofA analysts said that the revenue trajectory of previous interations of IBM’s mainframes has been improving, adding that the cycles have become "longer lasting".

IBM has also shifted to more flexible on demand or cloud-type pricing models with both mainframe software and hardware, they said. The z mainframe is tipped to drive at least one point of growth to the company’s revenue target of more than 5% growth, while 2026 is expected to "see upside" from the Spyre accelerator processors.

"Given the better capabilities, and with a resurgence in usage of the software that runs on the mainframe, we expect the z17 cycle to be another strong cycle," the BofA analysts led by Wamsi Mohan said in a note to clients.

They maintained their "buy" rating of IBM shares, adding that they view them as a defensive investment against broader economic uncertainty. IBM’s revenue growth and "attractive" dividend bolstered their backing of the stock as well.

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The comments come after IBM posted first-quarter results earlier this month that topped analysts’ estimates and maintained its annual guidance despite tariff uncertainty, as ongoing AI demand underpinned bookings growth at its key software segment.

"There continues to be strong demand for generative AI and our book of business stands at more than $6 billion inception-to-date, up more than $1 billion in the quarter," the company said.

But IBM (NYSE:IBM) flagged that 15 of its government contracts had been scrapped due to a cost-cutting push by the Trump administration, weighing on shares at the time.

For the second quarter, the company expects revenue to be in the range of $16.40 billion to $16.75 billion, compared with estimates for $16.31 billion. IBM also backed its forecast for full-year revenue growth of at least 5%.

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