IBM misses revenue estimates as server sales slow

International Business Machines Corp missed Wall Street estimates for third-quarter revenue on Tuesday, weighed down by slowing demand for its mainframe servers.

Overall revenue slipped 2.1 percent to $18.76 billion in the three months ended Sept. 30, missing financial analysts’ average estimate of $19.10 billion, according to I/B/E/S data from Refinitiv.

IBM’s systems unit, which includes mainframe servers sold to large organizations, climbed about 1 percent, compared with a 25 percent jump in the previous quarter.

Analysts have said sales of IBM’s z14 servers, introduced about one year ago, are slowing down as customers await the launch of newer machines before upgrading.

Still, systems sales of $1.74 billion fell short of analysts’ estimates of $1.79 billion, according to FactSet.

IBM’s cognitive software business, which houses artificial intelligence platform Watson, analytics and cybersecurity services, had sales of $4.15 billion, down 6 percent from a year earlier and also below expectations.

The Armonk, New York-based technology services giant, which makes over 60 percent of its revenue from outside the United States, has warned that the impact of a strengthening dollar will hit results in the second half of 2018.

IBM’s net income fell to $2.69 billion from $2.73 billion a year earlier. On a per-share basis, earnings rose to $2.94 from $2.92 due to a lower number of outstanding shares.

Excluding one-time items, IBM earned $3.42 per share, while analysts had expected $3.40. It was not immediately clear if the figures were comparable.