International Business Machines' (IBM) underlying metrics continue to "raise questions," despite a strong 2026 free cash flow guidance, UBS said in a research note Thursday.

Red Hat's software growth in constant currency slowed to just 8%, while Consulting only grew 1%, the firm said, adding that the company reported better-than-expected Q4 revenue driven by growth in infrastructure results.

The analysts said they focus on the company's 2026 FCF outlook of roughly $1 billion increase, as the constant currency revenue forecast of at least 5% inclusive of about 1 point from the pending Confluent deal was largely expected.

Despite the FCF outlook, concerns remain around the quality of cash flow, as a meaningful portion of it is used for acquisitions to sustain growth, the firm said.

The stock currently trades at around 25x its implied calendar year 2026 earnings outlook of $12.50, which is higher than that of faster-growing companies in its peer group, and the the risk-reward ratio does not look attractive, the brokerage added.

UBS maintained its sell rating on the stock and adjusted its price target from $210 to $236.

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