IBM's consulting and infrastructure revenue disappoints, causing stock prices to slide.

• IBM's software business outperformed thanks to acceleration in the Red Hat business.
• But the consulting and infrastructure units came up short on revenue.
• The company anticipates fourth-quarter revenue growth at constant currency to be the same as the third quarter, which was 2%.

On Wednesday, the hardware, software, and consulting provider's shares moved 4% lower in extended trading after falling short of Wall Street's revenue expectations for the third quarter.

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

• Earnings per share: $2.30 adjusted vs. $2.23 expected
• Revenue: $14.97 billion vs. $15.07 billion expected

IBM's revenue grew by 1.5% annually, but it suffered a net loss of $330 million, or 36 cents per share, compared to a net income of $1.70 billion, or $1.84 per share, in the previous quarter.

In the fourth quarter, IBM expects revenue growth at constant currency to be the same as the third quarter, which was 2%. The company has set a target of over $12 billion in 2024 free cash flow, with $6.59 billion already earned in the first nine months of the year.

In the third quarter, IBM's revenue from software was $6.52 billion, which is up around 10% and above the $6.37 billion consensus among analysts polled by StreetAccount. Additionally, revenue from Red Hat, an acquisition made in 2019, grew 14%, compared to 7% in the second quarter. The software segment had a gross margin of 83%, which was higher than any other segment.

IBM's consulting revenue of $5.15 billion declined 0.5% and was slightly below the $5.19 billion StreetAccount consensus. Despite this, the consulting unit is still facing a very uncertain economic environment, according to IBM's finance chief, Jim Kavanaugh, who spoke to CNBC's Seema Mody.

The infrastructure segment of the company generated $3.04 billion in revenue, which was a 7% decline and below the $3.24 billion consensus forecast by StreetAccount. Kavanaugh informed Mody that clients are eagerly anticipating the release of a new mainframe computer in the first half of 2025.

IBM's generative artificial intelligence business has surpassed $3 billion, with a growth of over $1 billion in the second quarter, as per the statement.

IBM announced plans to expand its network of product consultants and acquire Oracle services company Accelalpha during the quarter. Additionally, the company completed the sale of its QRadar cloud software assets to and the acquisition of StreamSets and webMethods from Software AG.

IBM shares have increased by approximately 43% this year, outpacing the S&P 500 index's gain of around 21%.

Analysts will receive a conference call from executives to discuss the results starting at 5 p.m. ET.

This is breaking news. Please check back for updates.

According to Gary Cohn of IBM, the Fed will reduce interest rates by 100 basis points in 2021.