IBM's financial results for Q3 of 2024 failed to meet analyst expectations.

The company took a hit in its infrastructure business, and its consulting revenue failed to grow. However, the results were softened by a solid performance in IBM's software offerings.

The quarter saw total revenue of $15bn, up one percent year-over-year (YoY). Software revenue increased by 10 percent YoY, while consulting revenue remained flat and infrastructure revenue fell by seven percent.

IBM's Infrastructure offerings saw revenues of $3bn in the quarter. The company's mainframe offering - IBM Z - was down by a significant 19 percent, while distributed infrastructure saw a three percent hit. Infrastructure Support was down four percent.

IBM's CEO and chairman, Arvind Krishna, put some of this down to "product cycle dynamics," noting that the z16 remains ahead of previous cycles. Krishna later added during the earnings call that IBM expects to see "significant upticks" in the infrastructure business in the first half of 2025.

Krishna added that the company is confident in this future growth as IBM has been "hard at work rebuilding our portfolio to be both sustainable and have a lot more value for our clients in terms of the innovation we are delivering them as well as our ability to manage the cost and complexity."

The dip in its infrastructure segment is notable following a stronger Q2, which reported $3.65 billion in revenue, up 0.8 percent and ahead of the expected $3.51 billion.

Regarding the overall flat consulting business, Krishna said IBM has been impacted by a "pause in discretionary spending" which is due to economic uncertainty stemming from "geopolitical issues, upcoming elections, and the changing landscape of interest rates and inflation levels."

Software, on the other hand, saw revenues of $6.5bn, with Red Hat up 14 percent, Automation up 13 percent, Data & AI up five percent, and Transaction Processing up nine percent. Only Security dipped on the software side, by one percent.

The AI Book of Business - IBM's combination of bookings and actual sales across a variety of products - grew by $1bn during the quarter to $3bn. Of that $1bn, one-fifth was driven by software, and four-fifths by consulting.

IBM generated net cash from operating activities of $2.9 billion, down $200 million YoY, and its free cash flow was $2.1 billion, up $400 million YoY. The debt balance for the quarter was flat with year-end 2023 at $56.5bn.

Notable achievements this quarter for IBM include the announcement of Telum II, IBM's next-generation processor for Z, and the Spyre Accelerator, which will improve IBM Z's AI capabilities. IBM also launched its first Quantum Data Center in Europe.

Following the earnings call, IBM shares fell around four percent, having previously risen more than 40 percent this year.