How IBM Became an AI Darling

Why It Matters

IBM’s transformation validates the viability of legacy tech firms reinventing around AI, reshaping competitive dynamics and offering enterprises a trusted partner for AI integration.

Key Takeaways

• IBM shifted from hardware to services in 1990s
• Sold PC division to Lenovo in 2005
• Rebranded around AI, launching Watson platform
• European Digital Sales centre drives AI cloud adoption
• AI revenue grew double digits, surpassing $5B

Pulse Analysis

IBM’s latest evolution is rooted in a history of bold pivots. In the mid‑1990s, the company abandoned its dwindling mainframe focus, embracing IT services that generated recurring revenue and stabilized cash flow. The 2005 sale of its PC division to Lenovo unlocked billions of dollars, which IBM redirected into software, cloud infrastructure, and emerging technologies. This strategic capital reallocation laid the groundwork for a modern, service‑oriented enterprise that could swiftly adopt new growth engines.

The AI renaissance began with Watson, IBM’s flagship cognitive platform, which transitioned from a high‑profile Jeopardy! showcase to a suite of enterprise solutions. IBM invested heavily in hybrid cloud, data fabric, and AI research, integrating Watson into industry‑specific offerings for finance, healthcare, and manufacturing. The launch of a European Digital Sales centre underscores a targeted go‑to‑market approach, pairing local expertise with AI‑powered cloud services to accelerate adoption across regulated markets. This hub not only expands IBM’s footprint but also showcases its commitment to delivering AI at scale.

IBM’s AI‑driven revenue now grows at double‑digit rates, surpassing $5 billion and signaling a successful shift from legacy hardware to high‑margin software and services. The company’s ability to monetize AI across its extensive client base challenges newer cloud‑only rivals and reinforces the value of deep industry knowledge. As enterprises accelerate AI integration, IBM’s hybrid cloud and AI stack positions it as a trusted partner, shaping the future of enterprise technology and influencing market dynamics for years to come.

How IBM became an AI darling

Business · Out of the blue · Jan 29 2026 · 4 min read

Inside IBM's new European Digital Sales centre. – Photograph: Getty Images

Throughout its 115‑year life IBM has shown itself to be a master of reinvention. In the mid‑1990s the mainframe pioneer rescued itself from collapse by shifting its focus to the booming business of IT services. A decade later it sold its struggling PC division to China’s Lenovo.

This article appeared in the Business section of the print edition under the headline “Out of the blue.”