IBM Shares Fall as Company Misses on Revenue

Shares of IBM were moving lower on Wednesday after the company reported third quarter financial results.
IBM reported revenue that fell for the fifth quarter in a row.

For the quarter, the tech giant reported earnings of $2.68 a share, excluding certain items. This was a penny higher than the $2.68 a share that analysts had expected according to Refinitiv.

Revenue at $18.03 billion was below the $18.22 billion that was expected by analysts, per Refinitiv.

IBM’s revenue has now dropped for five straight quarters. Revenue in the third quarter fell about 4% on an annualized basis, IBM said in a statement, even with contributions from Red Hat, an acquisition that closed in the third quarter.

Red Hat revenue grew 19% in the quarter on a normalized basis, up from the 14.8% growth in Red Hat’s last quarter as an independent company.

James J. Kavanaugh, Senior Vice President and Chief Financial Officer said on the earnings call, “This quarter, we continue to see good performance in the key high-value areas of data and AI, security, cloud and digital. We continue to bring new innovations to the market, launching our z15 mainframe and containerization our software. And of course, we closed the acquisition of Red Hat, where we’ve had a good first quarter, with Red Hat revenue growth accelerating to 20% on a normalized basis.”

Looking ahead, Kavanaugh said, “As we move into the fourth quarter, this is seasonally our biggest transaction quarter. It will be the first full quarter of availability for our z15, and we are expecting a normal IBM z cycle. And we’re assuming we have solid software transactional execution. And of course, we’re still facing a strengthening dollar. With all of this and a steady economic environment, we continue to expect to deliver at least $12.80 of operating earnings per share and free cash flow of $12 billion for the year. This is consistent with the view we provided on August 2, when we updated our view of the full-year for the acquisition of Red Hat.”

Disclaimer: We have no position in IBM Common Stock (NYSE: IBM) and have not been compensated for this article.