International Business Machines (NYSE:IBM) reported third-quarter earnings that beat analyst estimates, but revenue fell short of expectations, sending shares down 4.5% in after-hours trading.
The technology giant posted adjusted earnings per share of $2.30, surpassing the analyst consensus of $2.22. However, revenue came in at $15 billion, slightly below the $15.04 billion analysts had forecast. Compared to the same quarter last year, revenue increased 1%, or 2% at constant currency.
IBM 's Software segment was a bright spot, with revenue growing 9.7% YoY to $6.5 billion. The company's Red Hat business saw a 14% increase in revenue. However, the Infrastructure segment experienced a 7% decline in revenue to $3 billion.
Arvind Krishna, IBM's chairman, president and chief executive officer, highlighted the company's progress in artificial intelligence, stating, "Our generative AI book of business now stands at more than $3 billion, up more than $1 billion quarter to quarter."
Despite the revenue miss, IBM maintained its full-year 2024 outlook, expecting constant currency revenue growth consistent with its mid-single digit model. The company also raised its free cash flow guidance to more than $12 billion for the year.
James Kavanaugh, IBM's senior vice president and chief financial officer, commented on the company's financial performance, saying, "Our investments are paying off in Software as we've repositioned our portfolio in recent years."
The significant stock drop following the earnings release suggests investors may be concerned about IBM's ability to meet growth expectations.
Shares are up 42% year-to-date.