06:33 AM EDT, 10/24/2024 (MT Newswires) -- International Business Machines ( IBM ) shares fell early Thursday as the company's third-quarter earnings came in ahead of Wall Street expectations but revenue fell short of market estimates amid declines in the technology giant's consulting and infrastructure segments.

Per-share adjusted earnings came in at $2.30 for the September quarter, up from $2.20 the year before, the computer hardware and software firm said late Wednesday. The consensus on Capital IQ was for normalized EPS of $2.23. Revenue ticked up 1% year over year to $14.97 billion, but missed the Street's view for $15.08 billion.

"While overall revenue performance was mixed, we continue to reposition our portfolio towards a higher growth, higher margin business that is well positioned to address client needs around hybrid cloud and artificial intelligence," Chief Executive Arvind Krishna said during an earnings call, according to a Capital IQ transcript. The stock declined 4.7% in the most recent premarket activity.

Revenue in the software segment advanced 9.7% to $6.52 billion as hybrid platform and solutions increased 10%, while transaction processing climbed 9%. "Our investments are paying off in software as we've repositioned our portfolio in recent years," Chief Financial Officer James Kavanaugh said in a statement. "In the third quarter, software delivered broad-based growth and now represents nearly 45% of our total revenue."

Consulting revenue slipped 0.5% to $5.15 billion. The division continued to be impacted by a "dynamic market environment" as clients reprioritize their IT budgets to prepare for generative artificial intelligence, Kavanaugh said on the call. Sales in the infrastructure business dropped 7% to $3.04 billion, weighed down by declines in the hybrid infrastructure and infrastructure support categories.

"Despite the weak current demand environment, we are well positioned to capture growth from generative AI," Kavanaugh said. "We continue to build a solid generative AI book of business with about $1 billion of new bookings in the quarter."

For the ongoing three-month period, IBM ( IBM ) anticipates revenue growth to be consistent with the third quarter on a constant-currency basis. Foreign exchange is pegged to be a half-point headwind to revenue growth in the fourth quarter. The company expects low double-digit revenue growth for the software segment in the current quarter, while consulting is forecast to be "similar" to the previous quarter, Kavanaugh told analysts.

For full-year 2024, the firm remains "confident" in its ability to generate free cash flow of more than $12 billion, driven primarily by growth in adjusted earnings before interest, taxes, depreciation and amortization, Kavanaugh said on the call. "Actions taken in the third quarter helped accelerate our productivity initiatives, and we now believe we can achieve approximately $3.5 billion in annual run rate savings by the end of 2024, up from $3 billion," the CFO added.

Price: 219.65, Change: -13.10, Percent Change: -5.63