IBM revenue rises 5% as software outpaces consulting in the third quarter

IBM reported third-quarter revenue of $17.1 billion, an increase of 5% as reported and 6% at constant currency. Software revenue grew 8%, infrastructure increased 4% and consulting was flat, creating a quarter in which product and platform growth outpaced service growth.

GAAP net income from continuing operations rose 26% to $2.2 billion, and diluted earnings increased by the same percentage to $2.31 a share. IBM reported an operating, non-GAAP result of $2.8 billion in net income and $2.95 a share. The adjusted figures exclude acquisition-related, retirement-related and other specified items.

The company's GAAP gross margin was 56.8%, down half a percentage point from a year earlier. Its operating pretax margin increased seven-tenths of a point to 19.3%. Through the first nine months, IBM generated $11.8 billion in operating cash flow and $7.8 billion in free cash flow.

IBM continues to expect full-year revenue growth of 4% to 5% at constant currency. The segment results give technology buyers and competitors a clearer view of where spending is expanding: software remained the principal growth engine, while consulting did not grow on a reported basis. Constant-currency and non-GAAP comparisons should be read separately from the company's reported results.

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