IBM beat Wall Street estimates for third-quarter revenue and profit on Wednesday, driven by booming demand for its software and new mainframe as the rush to deploy AI models boosts sales for the under... ...

Core Insights - IBM experienced a slowdown in growth in its key cloud software segment, which overshadowed strong AI-driven demand for its new mainframe, leading to third-quarter sales and profit exceeding market estimates [1][2] Group 1: Cloud Segment Performance - Sales growth in IBM's hybrid cloud unit, Red Hat, decelerated to 14% from 16% in the previous quarter, raising concerns among investors about the company's ability to capitalize on the increasing demand for cloud services driven by AI adoption [2][3] - CEO Arvind Krishna indicated that the hybrid cloud unit is expected to return to mid-teen percentage growth entering 2026 [3] Group 2: Financial Performance - IBM reported third-quarter revenue of $16.33 billion, surpassing analysts' average estimate of $16.09 billion [2] - The infrastructure segment, which includes the mainframe, saw revenue rise 17% to $3.56 billion in the quarter [4] Group 3: AI and Mainframe Developments - The new mainframe, designed with AI-specialized chips, is gaining traction in the financial industry, facilitating compliance with data residency and encryption regulations as firms adopt AI technology [5] - IBM's AI business grew to $9.5 billion, an increase of $2 billion from the second quarter [5] Group 4: Future Outlook - IBM raised its revenue growth outlook for the current fiscal year to more than 5% at constant currency, up from a prior forecast of at least 5% growth [6]