IBM's Q3 revenue up 5%, beats estimates on cloud and security services

The company's shares rose nearly 5% to $152.80 in extended trading on Tuesday.

International Business Machines Corp's shift to newer businesses such as cloud and security services helped it beat Wall Street's quarterly revenue estimates, and the company said its latest mainframe is getting "enthusiastic adoption".

The company's shares rose nearly 5 per cent to $152.80 in extended trading on Tuesday.

Revenue in the company's mainframe business jumped 60 per cent in the third quarter, Chief Financial Officer Martin Schroeter told Reuters, adding that the business benefited from the newly launched Z14.

The company began shipping the new systems toward the end of September.

"System Z uptake topped our expectations, and likely helped support gross profit," said Josh Olson, an analyst with Edward Jones.

Under Chief Executive Ginni Rometty, IBM has in recent years shifted focus to growth areas across its businesses, such as cloud, cybersecurity and data analytics, to counter a slowdown in its legacy hardware and software businesses.

Revenue from these businesses, which IBM calls its "strategic imperatives", climbed 11 per cent to $8.8 billion in the third quarter ended Sept. 30.

Total revenue fell 0.4 per cent to $19.15 billion from a year earlier, marking the smallest quarterly drop since the third quarter of 2016.

IBM's revenue declined for the 22nd quarter in a row as the company continues to exit some legacy businesses while bolstering its "strategic imperatives".

Analysts on average had expected revenue of $18.60 billion, according to Thomson Reuters I/B/E/S.

The company's net income fell to $2.73 billion, or $2.92 per share, in the third quarter, from $2.85 billion, or $2.98 per share, a year earlier.

Excluding one-time items, IBM earned $3.30 per share, beating analysts' estimates of $3.28.