International Business Machines (IBM 2.48%) stock is gaining Thursday despite the broader tech sector seeing substantial sell-offs. The company's share price was up 3.9% as of 1:15 p.m. ET, according to data from S&P Global Market Intelligence. Meanwhile, the Nasdaq Composite index was down roughly 1.8%.
On Wednesday, IBM reported its third-quarter financial results. The company posted non-GAAP (adjusted) earnings per share of $2.20 on sales of $14.8 billion. Meanwhile, the average analyst estimate had called for per-share earnings of $2.13 on revenue of roughly $14.7 billion. In addition to the Q3 beat, the tech giant also announced a new generative artificial intelligence (AI) tool for coding.
IBM is bucking the trend on a bad day for tech stocks
IBM's revenue rose 5% year over year in Q3. Software sales were up 8%, and consulting revenue was up 6%. On the other hand, infrastructure revenue was down 2%.
For the full year, the company reiterated its guidance for revenue to be up between 3% and 5% on a constant currency basis. Management also continues to anticipate that it will end the year with approximately $10.5 billion in free cash flow, representing an increase of more than $1 billion compared to last year's figure.
All in all, it was a solid quarterly performance for Big Blue -- and the company followed it up by debuting its new generative AI coding tool. IBM's Code Assistant has been designed to make it easier for enterprise developers to code more quickly and efficiently. Given how hot the AI trend has been lately, investors were likely excited to see the new offering launch today.
What comes next for IBM stock?
Today's tech sell-off is hitting companies with growth-dependent valuations hardest. Notably, IBM still looks quite cheap based on some valuation metrics even on the heels of today's gains.
The company is currently valued at just 15 times this year's expected earnings. It also pays a dividend yielding 3.5%.
On the other hand, the company's growth has been very muted in recent years, and it's not clear whether its recent uptick in performance will be sustainable. IBM has streamlined its business through spinoffs and has restructured the company to focus on areas with stronger expansion prospects. It's also moved into the open-source software services through its acquisition of Red Hat, and the unit delivered an encouraging performance last quarter.
But the company's ability to innovate and execute growth strategies over the last decade has been uninspiring. It's possible that the company will be able to score some meaningful wins in the AI space, but it's likely still at a significant disadvantage compared to other big tech rivals that have invested more heavily in innovation and established stronger foundations for success in the promising technology trend.
IBM stock could continue to climb thanks in large part to its non-prohibitive valuation, but it's still too soon to herald a major turnaround for the company.