International Business Machines Corp (NYSE:IBM) reported a mixed bag for its third-quarter earnings on Tuesday, with a notable performance from its software segment but disappointing results from its consulting and infrastructure units.
The technology giant posted adjusted earnings per share (EPS) of $2.30, surpassing analysts' expectations of $2.23.
However, its revenue fell short, totaling $14.97 billion, compared to the projected $15.07 billion.
The company's software business, driven by a resurgence in the Red Hat (NYSE:RHT) segment, generated $6.5 billion in revenue, reflecting a 9.7% increase year-over-year. This performance is a positive indicator of IBM's strategic pivot towards hybrid cloud and artificial intelligence (AI), which now represent nearly 45% of the company's total revenue.
Despite the strong software results, consulting revenues dipped slightly to $5.2 billion, down 0.5%, while infrastructure revenue dropped 7% to $3.0 billion. These shortfalls were attributed to a slowdown in demand for traditional consulting services.
"Our third-quarter performance was led by double-digit growth in Software, including a re-acceleration in Red Hat (NYSE:RHT)," said Arvind Krishna, IBM's CEO. "We continue to see great momentum in AI as our models are trusted, fit-for-purpose, and lower cost, with performance leadership."
Looking ahead, IBM forecasts fourth-quarter revenue of $17.28 billion and an EPS of $2.78, with expectations of consistent constant currency growth.
Shares of IBM were down around 4.6% following the release of its earnings.