International Business Machines Corp. shares fell in the extended session Wednesday after the company’s revenue fell short of Wall Street expectations.
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The company reported third-quarter net income of $1.13 billion, or $1.25 a share, compared with $1.7 billion, or $1.89 a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $2.52 a share, compared with $2.58 a share in the year-ago period.
While earnings were in-line with the Wall Street’s consensus, revenue wasn’t. Revenue rose to $17.62 billion from $17.56 billion in the year-ago quarter. Analysts had estimated earnings of $2.52 a share and a revenue of $17.79 billion.
IBM reported Cloud and Cognitive Software revenue of $5.69 billion, Global Business Services revenue of $4.43 billion, Global Technology Services revenue of $6.15 billion, and Systems revenue of $1.1 billion.
Analysts expected Cloud and Cognitive Software revenue of $5.77 billion, Global Business Services revenue of $4.29 billion, Global Technology Services revenue of $6.26 billion, and Systems revenue of $1.23 billion.
“With the separation of Kyndryl early next month, IBM takes the next step in our evolution as a platform-centric hybrid cloud and AI company,” said Arvind Krishna, IBM chairman and chief executive, in a statement. “We continue to make progress in our software and consulting businesses, which represent our higher growth opportunities. With our increased focus and agility to better serve clients, we are confident in achieving our medium-term objectives of mid-single digit revenue growth and strong free cash flow generation.”
IBM plans to change how it reports its businesses following the spinoff of its managed infrastructure-service business Kyndryl. Under the new scheme, Consulting will replace “Global Business Services,” Software will replace “Cloud and Cognitive software,” and Infrastructure will replace “Systems” along with those parts of “Global Technology Services” that aren’t included with the Kyndryl spinoff. IBM said Kyndryl will be classified as “discontinued operations,” and the remaining company’s reporting will focus on “Continuing Operations.”
“Our post-separation portfolio mix is shifted toward our growth vectors, with a higher-value recurring revenue stream and strong cash generation, allowing us to continue to invest in the business and provide attractive shareholder returns,” said IBM Chief Financial Officer James Kavanaugh in a statement.
