On an adjusted basis, the company earned $4.32 per share, beating analysts' average estimate of $4.29, according to Thomson Reuters I/B/E/S.
Shares dropped nearly 2 percent in after-hours trading. (Click here to get the latest quotes.)
Hardware revenue plunged 11 percent to $3.3 billion, the seventh out of the last eight quarters the sector has seen double-digit declines weighed by continued cyclical pressure on its Power Systems servers.
The company's software business grew, with revenue rising 1 percent to $6.5 billion. IBM expects the sector to bring in half of the company's profits by 2015.
Read MoreDruckenmiller: IBM 'poster child' of bad growth
The company's global technology services fell 1.7 percent to 9.6 billion.
Earlier this week, IBM said it will create a suite of more than 100 business applications exclusively for Apple's IOS platform.
Some of the services IBM will provide via iOS include device management, security, analytics and mobile integration, the companies said in a release. In return, Apple's vaunted AppleCare service would provide support for these applications.
The partnership is about "transforming enterprise," Apple CEO Tim Cook told CNBC in an exclusive interview. The partnership aims to "deliver on the promise of mobile in a big way," he said.
—By Reuters. CNBC contributed to this report.