IBM revenue missed even the most pessimistic estimates

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IBM shares fell more than 5 percent in after-hours trading Monday after the company announced third-quarter revenues that missed expectations, and offered weaker than expected guidance for the year.

The tech giant reported earnings of $3.34 per share on $19.28 billion in revenue. Analysts had expected IBM to report earnings of about $3.30 a share on $19.62 billion in revenue, according to a consensus estimate from Thomson Reuters.

IBM's revenue figure came in below the Wall Street low: The lowest revenue estimate of 17 analysts for the quarter was $19.292 billion. Monday's announcement marked the 14th straight quarter that IBM's revenues fell.

Still, the company said its revenue change — a 19 percent decline from the same time last year — was only a 1 percent fall adjusting for currency and other factors.

"A few things to note...within the revenue we report we have a pretty substantial currency headwind we continue to deal with and as we transform our business we continue to move out of areas where we don't see long term value, so across our revenue base that's about 13 points of impact so excluding those two in the third quarter we reported a down about 1 percent revenue," IBM CFO Martin Schroeter told CNBC after the earnings report.

IBM said its Americas' revenues for the quarter were $9.1 billion — a decrease of 10 percent from the same time last year. Asia-Pacific revenues, meanwhile, fell 19 percent to $4.1 billion, the company reported.

"EPS is affected by the value of the dollars you earn overseas which just aren't as strong," Ariel Investments' Charlie Bobrinskoy told CNBC. "We've got weakness in Asia, we've got some weakness in parts of Europe. So I think IBM's a perfect example. We're very long term bullish on it but I think it's going to be a very choppy quarter."

BRIC countries revenue fell 7 percent (adjusting for currency and divestment), Schroeter said, adding that China fell 17 percent and India grew by "double digits."

Addressing the perceived weakness in Asia, the company's CFO commented on IBM's China prospects.

"They want the most contemporary and globally enabled platforms so the mainframe continues to do well. We've added new mainframe customers again around the world but also in China and the power platform there continues to be quite relevant in the marketplace," Schroeter said.

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In its results announcement, IBM took a positive note on the company's fortunes.

"In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins," Ginni Rometty, IBM's chairman, president and CEO, said in the release. "We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business — where we see long-term value for our clients and shareholders."

Big Blue updated its 2015 adjusted earnings guidance to $14.75 to $15.75 per share — Wall Street had expected about $15.68. Schroeter said on IBM's Monday call that the projections reflect an impact by currencies and divestitures.

On the strategic imperatives front — cloud, analytics and engagement — revenue increased 17 percent year-to-year (27 percent adjusting for currency and System x business divestment), the company said. In total, cloud revenues increased more than 45 percent year-to-date, IBM announced.

"As we transform our business we invest where we see higher value over the longer term, we drive growth in the areas where we're investing, while other areas decline as we shift the business, and we expect to expand margins in our move to higher value," Schroeter said during the company's earnings call, citing the strategic imperatives growth. "This is how we transform from one era to the next. Our third-quarter results reflect the progress we're making in that transformation."

Schroeter said his company is on the "right strategy," and promised that IBM will continue to invest at a "very high level."

Big Blue's software revenues fell 10 percent to $5.1 billion compared to the comparable year-ago period — this roughly matched Wall Street's average analyst expectations of $5.15 billion in software revenues, according to StreetAccount.

IBM stock has dipped over the past 12 months — falling about 18 percent while most major averages are higher over that time.

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Billionaire Warren Buffett — a large shareholder in the tech company — has repeatedly said he's not concerned about the dips in share price, even suggesting that he might be buying up more stock.

For its part, Big Blue has grown cozier with Apple by integrating MacBooks into its enterprise systems. The long-standing tech giant has also looked to expand its Watson artificial-intelligence system.

On the call Schroeter boasted that the Watson program has come a long way since it played "Jeopardy!" in 2011. Beyond the question-answer function, the artificial-intelligence tech now offers more than 25 different services or APIs, he explained.

While the returns on Watson and Watson Health investments are not yet entering IBM's revenue streams, Schroeter said those projects are "the right things to do because those have tremendous futures to them."

—CNBC's Josh Lipton and Reuters contributed to this report.

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