International Business Machines (NYSE:IBM) reported third-quarter earnings that beat analyst estimates, but revenue fell short of expectations, sending shares down more than 4% in premarket trading Thursday.

The technology giant posted adjusted earnings per share of $2.30, surpassing the analyst consensus of $2.22. However, revenue came in at $15 billion, slightly below the $15.04 billion analysts had forecast. Compared to the same quarter last year, revenue increased 1%, or 2% at constant currency.

IBM 's Software segment was a bright spot, with revenue growing 9.7% YoY to $6.5 billion. The company's Red Hat business saw a 14% increase in revenue.

However, the Infrastructure segment experienced a 7% decline in revenue to $3 billion. Also, revenues in the company's Consulting business remained flat and signings fell 4% year-over-year.

Arvind Krishna, IBM's chairman, president and chief executive officer, highlighted the company's progress in artificial intelligence, stating, "Our generative AI book of business now stands at more than $3 billion, up more than $1 billion quarter to quarter."

Despite the revenue miss, IBM maintained its full-year 2024 outlook, expecting constant currency revenue growth consistent with its mid-single digit model. The company also raised its free cash flow guidance to more than $12 billion for the year, although it did not reaffirm its targeted 4% revenue growth rate.

In a post-earnings note, Bernstein analysts there may be some profit-taking from investors after the report, given IBM's rally of around 26% in the past 3 months.

"We believe expectations going into the print were high, and given that estimates are unlikely to change and investors might emerge incrementally more cautious on
the consulting business, we see some potential from profit taking coming out of the print," they said.

Separately, RBC Capital Markets analysts commented that IBM delivered "a solid but uneven quarter," noting that the strength in Software, especially the Red Hat business, was offset "by slowing infrastructure spend as well as continued macro headwinds on non-genAI Consulting."

James Kavanaugh, IBM's senior vice president and chief financial officer, commented on the company's financial performance, saying, "Our investments are paying off in Software as we've repositioned our portfolio in recent years."

The significant stock drop following the earnings release suggests investors may be concerned about IBM's ability to meet growth expectations.