IBM Q3 2024 earnings

IBM Shares fell 3% in extended trading on Wednesday after the hardware, software and consulting provider fell short of Wall Street's third-quarter revenue expectations.

Here's how the company performed compared to the LSEG consensus:

• Earnings per share: $2.30 adjusted vs. $2.23 expected
• Revenue: $14.97 billion versus expected $15.07 billion

IBM's total revenue rose 1.5% year over year, according to a statement. The company reported a net loss of $330 million, or 36 cents per share, compared with net income of $1.70 billion, or $1.84 per share, in the year-ago quarter. IBM posted a loss following a one-time pension settlement related to an agreement with Prudential.

For the fourth quarter, management expects currency-adjusted sales growth to be in line with the third quarter. Sales rose 2% at constant currency in the third quarter. IBM reiterated its goal of free cash flow topping $12 billion in 2024 after earning $6.59 billion in the first nine months of the year.

In the third quarter, IBM reported software revenue of $6.52 billion. The figure is up about 10% and above the $6.37 billion consensus of analysts surveyed by StreetAccount. Revenue at Red Hat, an acquisition in 2019, rose 14%, compared with 7% in the second quarter. Software achieved a gross margin of 83%, higher than any other segment.

Advisory revenue of $5.15 billion fell 0.5%, slightly below the StreetAccount consensus of $5.19 billion. Business Transformation revenue increased 2%, compared to 6% growth in the second quarter. The consulting unit, alongside its competitors, still faces a very uncertain economic environment, Jim Kavanaugh, IBM's chief financial officer, told CNBC's Seema Mody.

The company's infrastructure segment posted revenue of $3.04 billion, down 7% and below the StreetAccount consensus of $3.24 billion. Customers are looking forward to new mainframe computers in the first half of 2025, Kavanaugh told Mody.

According to the statement, IBM now has a generative artificial intelligence business base of over $3 billion, up more than $1 billion in the second quarter.

During the quarter, IBM announced that it would expand its network oracle Product advisor and purchase of Oracle services company Accelalpha. The company also completed the sale of its QRadar cloud software assets to Palo Alto Networks and the acquisition of StreamSets and webMethods from Software AG.

Excluding after-hours movement, IBM shares are up about 43% so far this year, while the S&P 500 index has gained about 21% over the same period.

Executives will discuss the results with analysts on a conference call beginning at 5:00 p.m. ET.

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