Jim Cramer tells investors that IBM is a ‘trust but verify’ situation

CNBC’s Jim Cramer on Thursday advised investors to tread carefully if they’re debating whether to buy shares of IBM after the company reported its third-quarter earnings.

“Even after IBM’s nearly 5% rally today, the stock’s still down substantially versus where it was trading just a few months ago. I’m optimistic … but keep in mind this remains a ‘trust but verify’ situation going forward,” he said.

IBM beat revenue and earnings estimates in its third-quarter results reported on Wednesday and raised its revenue outlook. The enterprise software and consulting company said that revenue increased 6.5% year-over-year.

While the strong U.S. dollar is a headwind for the company, which expects that it will have 7% less full-year revenue than it otherwise would have made, IBM still reiterated its guidance from earlier this year of around $10 billion in free cash flow.

“Put it all together, and while IBM still has plenty of room for improvement, this quarter was a big step forward for them, and it was a major win for the bulls,” Cramer said.

He added that the company’s spin-off of its managed infrastructure services business into Kyndryl in November 2021 seems to be paying off.

“Remember, IBM went through that whole Kyndryl spin-off in order to become a growth company again, and that’s now what they are — they’ve got growth in spades,”  he said.