The company's shares fell 2.7 per cent in extended trading on Monday after third quarter results were announced.
However, its Cloud and cognitive software revenue rose seven per cent in the quarter.
For the third quarter, total cloud revenue reached $6 billion, an increase of 19 per cent.
"The strong performance of our cloud business, led by Red Hat, underscores the growing client adoption of our open hybrid cloud platform," IBM CEO Arvind Krishna said in a statement.
IBM acquired enterprise software company Red Hat last year for $34 billion.
Red Hat revenue for the quarter increased 17 per cent, said IBM which earlier this month announced that it will separate its managed infrastructure services unit of its
"Separating the managed infrastructure services business creates a market-leading standalone company and further sharpens our focus on IBM's open hybrid cloud platform and AI capabilities," the IBM CEO said.
"This will accelerate our growth strategy and better position IBM to seize the $1 trillion hybrid cloud opportunity," he added.
The company's third quarter results showed that global business services which include consulting, application management and global process services posted revenues of $4 billion, down five per cent driven by declines in application management and consulting.
Its global technology services revenues hit $6.5 billion, down four per cent, the company said.
"In the third quarter we continued to deliver strong gross profit margin expansion, generated solid free cash flow and maintained a sound capital structure with ample liquidity," said James Kavanaugh, IBM Senior Vice President and Chief Financial Officer.
"We have the necessary financial flexibility to increase our investments in hybrid cloud and AI technology innovation and skills, while remaining committed to our long-standing dividend policy."
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