IBM (NYSE: IBM) reported its third quarter financial results during aftermarket hours on Wednesday. On Thursday morning, shares fell by 6% after reporting weaker-than-expected revenue.
For the third quarter, IBM reported earnings of USD 2.68 per share on revenue of USD 18.03 Billion. Refinitiv analysts expected earnings of USD 2.67 per share on revenue of USD 18.22 Billion.
IBM reported that its revenue fell by 3.9% year-over-year and also marking five consecutive quarters of declining revenues, even though Red Hat reported a 20% growth in revenue at the end of the quarter.
Cloud and Cognitive Software revenues were USD 5.3 Billion, increasing by 6.4% year-over-year. The segment was primarily led by IBM’s security, IoT, data and AI platforms and hybrid cloud. Cloud and data platforms revenue was up 17% year-over-year. Meanwhile, cognitive applications revenues grew by 4%, while transaction processing platforms fell by 5%.
Global business services revenues rose by 1% to USD 4.1 Billion, led by a 4% growth in consulting.
Systems revenue fell by 14.7% to USD 1.5 Billion, reflecting the end of the IBM z14 product cycle and shipping of the new IBM z15 in the last week of September. Global financing also fell by 11.7% to USD 343 Million.
Notably, IBM’s slump is primarily attributable to its Global Technology Services segment, which includes its technology support service, infrastructure, and cloud services. The segment reported revenues of USD 6.7 Billion, decreasing by 5.6% year-over-year. The segment also missed FactSet analysts’ estimates of USD 6.75 Billion.
For the full-year, IBM expects to reported earnings of USD 12.80 per share, excluding the impact of the Red Hat acquisition and related activities. IBM expects free cash flow of approximately USD 12 Billion.
Despite the disappointing quarterly results, IBM shares are still up 18% this year.