12:03 PM EDT, 10/24/2024 (MT Newswires) -- IBM ( IBM ) missed expectations for Q3 revenue, operating income and pretax income due to underperformance in consulting and infrastructure segments, as well as elevated workforce rebalancing costs that affected profitability, Morgan Stanley said in a note Thursday.

The software segment was a bright spot in the quarter, with Red Hat and Transaction Processing Platform delivering "impressive" year-over-year growth of 14% and 9%, respectively. However, slower core software growth outside of mergers and acquisitions remains a concern, according to the note.

Morgan Stanley said that consulting and infrastructure segments experienced declines, partly due to ongoing macroeconomic challenges, while the cyclical slowdown in mainframe purchasing behavior also contributed to underperformance in infrastructure.

The firm lowered its revenue and EPS estimates for 2024 and 2025, citing the downgrade to weaker-than-expected performance in consulting and higher operating expenses.

"Consulting headwinds make 2025 growth more second-half weighted than we previously expected," the firm said.

Morgan Stanley reduced its price target on IBM's ( IBM ) stock to $208 from $217 and reiterated its equal-weight rating.

Shares of the company were down over 6% in recent trading.

Price: 217.13, Change: -15.62, Percent Change: -6.71