About nine months ago, we had already described International Business Machines (IBM) as one of the most promising tech stocks having convincing reasons behind further potential of growth. This legend of the computing age has more than doubled its market value since last May. The latest case of surging its price by nearly 12% took place this week, following robust financial results from October to December.

The most remarkable reason laid in a more than 65% progress in the company's sales of artificial intelligence (AI) software, as generative AI Book of Business created by IBM stood at "more than $5 billion inception-to-date, up nearly $2 billion quarter over quarter", according to the company's CEO Arvind Krishna. The AI Book of Business combined bookings and sales from across a wide range of services, which were 80% consulting features, with software itself forming the rest. The segment has now made the largest contribution to revenue growth, which is precisely what creates a reserve in forecasts for an even more cloudless future (or rather, cloudy, if you'll pardon the pun) for IBM, which itself forecasts its future sales increase of at least 5% in constant currency for the fiscal year of 2025. This sounds much better than a 3% surplus recorded in 2024.

We think that IBM's recent collaboration with Amazon Web Services (AWS), which began last spring helped a lot as AWS is the world's most popular software marketplace. The results of these privileged sales may be felt for years to come, but they were visible in the first six months, which is a kind of surprise for markets. Another positive driver was that IBM simultaneously open-sourced its "Granite" family of AI models in May 2024 while rival developers including Open AI's partner Microsoft (MSFT) always charge a fee for access to new generative chats. Having thoroughly tasted the product for free, users might then want an advanced version for reasonable money.

On the negative side, perhaps, was that overall consulting revenue fell about 2% to $5.2 billion, but software sales grew more than 10% in the quarter. Nevertheless, the company estimated that its consumers are now focusing their spending on longer-term consulting deals for a smooth integration of the AI features into their regular business, which is likely not yet fully reflected in recent IBM's sales figures. This means investors have strong foundations to expect even better top and bottom lines in the nearest reports. Software demand is seeing its biggest jump in five years, driven by consumer prioritization of cloud infrastructure spending as everyone rushes to adopt various data-intensive and AI-related processes.

Overall, IBM grew from Q3 revenue of $15 billion to $17.6 billion in Q4, 17.3% up quarter-by-quarter but only 1.2% compared to the record number in the same period a year ago. Its profit soared from $2.30 in Q3 to $3.92 per share, adding 70% in a quarter and consolidating slightly above last year's achievements, when it amounted to $3.87 per share. However, markets may rather consider this as a good start before accelerating further. The news allowed IBM stock to break through the previous multi-month level of technical resistance level just below $240. Moving higher to a new peak at $ 261.65 with a small rollback before the Wall Street closing bell on Thursday, January 30, may open the door to the next target area between $275 and $300. Yet, some price correction may be needed when reaching the lower end of this target range, as a similar scenario took place in summer 2024 after breaking $200 mark.