IBM stock slips on disappointing consulting and infrastructure revenue

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

Here's how the company did in comparison with LSEG's consensus:

IBM's overall revenue increased 1.5% year over year, according to a statement. It had 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 swung to a loss after a one-time pension settlement charge tied to an agreement with Prudential.

For the fourth quarter, management sees revenue growth at constant currency that's in line with the third quarter. Revenue grew 2% at constant currency in the third quarter. IBM reiterated its target of over $12 billion in 2024 free cash flow, having brought in $6.59 billion for the first nine months of the year.

In the third quarter, IBM generated $6.52 billion in revenue from software. The figure is up around 10% and above the $6.37 billion consensus among analysts polled by StreetAccount. Revenue from Red Hat, a 2019 acquisition, grew 14%, compared with 7% in the second quarter. It was the highest single quarter of signings since the acquisition, Jim Kavanaugh, IBM's finance chief, said on a conference call with analysts.

Software had a gross margin of 83%, higher than any other segment.

Consulting revenue of $5.15 billion declined 0.5% and was slightly lower than the $5.19 billion StreetAccount consensus. The result was at the lower end of IBM's expectations, CEO Arvind Krishna said on the conference call.

Business transformation revenue was up 2%, compared with 6% growth in the second quarter. The consulting unit is still facing a very uncertain economic