International Business Machines (IBM) missed Wall Street forecasts for quarterly income on Wednesday, as its global tech services business was struck by weakness in several European markets, pushing its shares down 5% in extended trading.
IBM, which concluded its acquisition of Linux maker Red Hat earlier this year, has faced years of income plunge amid its move to the cloud from its traditional businesses, along with mainframe servers.
Sales from global tech services, IBM’s most significant arm that caters to some of the world’s most extensive data facilities, had been weighed down by lower client business volumes, mainly in the U.K. and Germany, Chief Financial Officer James Kavanaugh mentioned on a post-earnings call.
After a down-cycle, the corporate expects mainframe business to come back to a normal product cycle in the fourth quarter.
Revenue from IBM’s cloud services soared 11% to $5 billion, helping the corporate beat profit estimations for the quarter.
Total income dropped 3.9% to $18.03 billion, missing analysts’ average estimate of $18.22 billion, based on IBES data from Refinitiv. Excluding the impact of currency and business divestitures, income plunged 0.6%.
IBM’s global know-how services unit reported a 5.6% fall in revenue to $6.70 billion.
Chief Executive Officer Ginni Rometty, who has led IBM for over seven years, is betting on subscription-based software program offerings with the Red Hat agreement, the corporate’s most significant acquisition so far.