• IBM's software business outperformed due to acceleration in the Red Hat business.
• But the consulting and infrastructure units came up short on revenue.
• The company sees fourth-quarter revenue growth at constant currency that is in line with the third quarter, when it was 2%.

IBM shares moved 3% lower in extended trading on Wednesday after the hardware, software and consulting provider fell short of Wall Street's revenue expectations for the third quarter.

Here's how the company did in comparison with LSEG's consensus:

• Earnings per share: $2.30 adjusted vs. $2.23 expected
• Revenue: $14.97 billion vs. $15.07 billion expected

IBM's overall revenue increased 1.5% year over year, according to a statement. It had a net loss of $330 million, or 36 cents per share, compared with net income of $1.70 billion, or $1.84 per share, in the year-ago quarter. IBM swung to a loss after a one-time pension settlement charge tied to an agreement with Prudential.

For the fourth quarter, management sees revenue growth at constant currency that is in line with the third quarter. Revenue grew 2% at constant currency in the third quarter. IBM reiterated its target of more than $12 billion in 2024 free cash flow, having brought in $6.59 billion for the first nine months of the year.

In the third quarter, IBM generated $6.52 billion in revenue from software. The figure is up around 10% and above the $6.37 billion consensus among analysts polled by StreetAccount. Revenue from Red Hat, a 2019 acquisition, grew 14%, compared with 7% in the second quarter. It was the highest single quarter of signings since the acquisition, Jim Kavanaugh, IBM's finance chief, said on a conference call with analysts.

Software had a gross margin of 83%, higher than any other segment.

Consulting revenue of $5.15 billion declined 0.5% and was slightly lower than the $5.19 billion StreetAccount consensus. The result was at the lower end of IBM's expectations, CEO Arvind Krishna said on the conference call.

Business transformation revenue was up 2%, compared with 6% growth in the second quarter. The consulting unit is still facing a very uncertain economic environment alongside its competitors, Kavanaugh told CNBC's Seema Mody.

The company's infrastructure segment had $3.04 billion in revenue, down 7% and beneath StreetAccount's $3.24 billion consensus. Clients are looking forward to new mainframe computer in the first half of 2025, Kavanaugh told Mody.

IBM now has a generative artificial intelligence book of business exceeding $3 billion, up more than $1 billion in the second quarter. About 80% of that is in consulting, with the remainder in software, Krishna said.

During the quarter, IBM said it would expand its network of Oracle product consultants and buy Oracle services company Accelalpha. The company also completed the sale of its QRadar cloud software assets to Palo Alto Networks and the acquisition of StreamSets and webMethods from Software AG.

Excluding the after-hours move, IBM shares have risen around 43% so far this year, while the S&P 500 index has gained about 21% during the same period.

WATCH: Fed will cut rates by 100 basis points this year, says IBM's Gary Cohn