Analysts had expected the company to report earnings of $5.41 a share on $24.77 billion in revenue, according to a consensus estimate from Thomson Reuters.
Global Technology Services, the company's largest segment, saw revenue decrease 8 percent to $9.2 billion. Wall Street was looking for sales of $9.53 billion, according to StreetAccount.
Global Business Services revenue fell 8 percent to $4.3 billion, missing StreetAccount expectations for $4.62 billion.
The technology and consulting company has struggled with declining revenue over the last three years, as business customers have moved away from buying big mainframe computers and traditional software that's installed on their own systems.
Read MoreYahoo's Mayer poised to make $37B Alibaba decision
IBM has been spending heavily to develop new products, such as data analytics and artificial intelligence programs and "cloud" software that IBM delivers to customers over the Internet. But those new businesses have not grown as fast as the company hoped, while revenue has continued to fall in IBM's traditional software, hardware and technology services businesses.
"We are making significant progress in our transformation, continuing to shift IBM's business to higher value, and investing and positioning ourselves for the longer term," said Ginni Rometty, the company's chairman, president and chief executive officer.
"In 2014, we repositioned our hardware portfolio for higher value, maintained a services backlog of $128 billion and achieved strong revenue growth across cloud, analytics, mobile, social and security. Together these strategic imperatives grew 16 percent in 2014 and now represent $25 billion and 27 percent of our revenue."
IBM, which announced an enterprise partnership with Apple in July, released the first fruits of that collaboration in December. The companies announced 10 cloud-connected applications that will address specific tasks for industries such as banking and retail.
After the company's third-quarter earnings miss in October, Rometty rebuffed suggestions that IBM might benefit from splitting up. She insisted that the tech giant has a "very clear strategy" for the future.
IBM has been criticized in the past for its policy of a significant buyback plan over investment in growth, but Chief Financial Officer Martin Schroeter argued in a recent CNBC.com commentary that this is a false choice.
The Associated Press contributed to this report.