IBM's (IBM, Financial) stock fell by 5% in after-hours trading after the company reported third-quarter earnings that missed Wall Street expectations. The company reported a net loss of $330 million, equating to a loss of $0.36 per share. This contrasts with a net income of $1.7 billion, or $1.84 per share, in the same period last year. Overall revenue grew by 1.5% year-over-year.
For the fourth quarter, IBM's management anticipates revenue growth to stabilize at the same levels as the third quarter when adjusted for constant currency. In the third quarter, revenue increased by 2% on a constant currency basis.
IBM's software segment performed strongly, with revenue hitting $6.52 billion, a 10% increase, exceeding analyst expectations of $6.37 billion. The acquired Red Hat's revenue surged by 14%, and the software segment's gross margin reached 83%, the highest among IBM’s business units.
Consulting revenue slightly fell by 0.5% to $5.15 billion, underperforming the expectations of $5.19 billion. IBM's CFO Jim Kavanaugh highlighted the challenging economic conditions affecting the consulting sector, similar to its competitors.
The infrastructure segment generated $3.04 billion in revenue, a 7% decrease and below the expected $3.24 billion. Expectations are set for new mainframe releases in the first half of 2025.
IBM’s generative AI business now exceeds $3 billion, marking over a $1 billion increase since the second quarter. IBM also plans to expand its Oracle product consulting network and has acquired Oracle services firm Accelalpha. The company sold its QRadar cloud software assets to Palo Alto Networks and acquired StreamSets and webMethods from Software AG.
So far this year, IBM's stock has risen approximately 43%, surpassing the S&P 500’s 21% gain.
