Important points
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Recent earnings reports from several large technology companies are forcing investors to reconsider which AI companies are actually building viable AI businesses.
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At the end of the day, the combination of hardware, software, and services into a complete system may have an advantage.
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While the name is not currently considered a major AI candidate, its continued growth this year should be decisive.
Most investors looking to capitalize on the artificial intelligence (AI) boom begin their search with familiar names such as: Nvidia, microsoftor alphabet. And rightfully so. These companies are not only advancing AI technology, but they are doing more to monetize it than most.
But there’s one largely overlooked AI company that’s just coming into its own and could easily outperform the industry’s favorite stocks.
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What’s its name? international office machine(NYSE:IBM). You’re probably familiar with IBM.
Image source: Getty Images.
yes, that IBM
That’s not a typo. Most people may not realize it, but IBM is deeply involved in the artificial intelligence business. It’s in there in a different way than when most people think of AI.
The main difference between them is that they don’t offer a consumer-facing platform like OpenAI’s ChatGPT or Google’s Gemini. Most of its tools are built for business purposes, such as automation and AI-powered customer service agents.
Another major difference is how these solutions are delivered. Unlike Nvidia, which focuses primarily on processor chips, or Alphabet’s Google, which only offers cloud-based access to its AI platform, IBM sells and services entire mainframe computers capable of processing AI tasks, giving customers flexibility that can only come from owning such equipment.
This business model makes IBM the perfect choice
But it’s not just high-performance hardware that makes IBM an attractive AI company. In fact, infrastructure only accounts for about a quarter of the business. The sales of these physical platforms are also quite noteworthy. They also require IBM-coded software to operate and often require ongoing consulting work provided by IBM. These two products account for a quarter and almost half (respectively) of the company’s total sales.
Not everything in this business is necessarily AI-related, but a lot of it is, and increasingly so. To date, IBM’s young generative AI products have generated $12.5 billion in cumulative revenue, most of which comes from consulting…a sector that currently boasts a $32 billion backlog just waiting for reservations. Meanwhile, software recurring revenue is currently running at $23.6 billion annually, much of it coming from IBM’s AI efforts.
For reference, the company reported full-year 2025 sales of $67.5 billion, a 6% increase from 2024 sales.
IBM is just waiting for investors to take notice.
The bullish key to IBM stock leading the market in 2026 is rooted in a sense of reality driven by results. Most investors may not yet realize how much of this company’s future business is already planned and just waiting to be reported. But as the company continues to report profitable revenue growth, more and more investors should start to appreciate the company’s razor-like business model.
The continued introduction of new AI technologies, such as Project Bob announced late last year, will reinforce this bullish stance. More than just a software coding assistant, Bob is an enterprise-grade tool that can accept instructions from other AI-powered agents as flexibly as it would from a human, while ensuring that new coding complies with the company’s security and compliance policies.
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James Brumley holds a position at Alphabet. The Motley Fool has positions in and recommends Alphabet, International Business Machines, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
