Non-GAAP earnings for the fourth quarter were $4.84 a share.
Wall Street was looking for fourth quarter earnings of $4.81 a share on revenue of $22.04 billion. For 2015, IBM reported earnings of $13.1 billion, or $13.60 a share, on revenue of $81.7 billion.
IBM is navigating multiple issues including a stronger U.S. dollar, which hurts profits for a company with international units. In addition, IBM is facing slowing hardware, software and services sales amid the shift to the cloud.
But IBM is showing cloud and analytics traction, but the growth isn't strong enough to offset declines elsewhere. the company said total cloud revenue was $10.2 billion, but as-a-service sales were $4.5 billion. IBM said it has a run rate of $5.3 billion for cloud delivered as a service. Analytics revenue was up 7 percent from a year ago.
CEO Ginni Rometty said IBM now derives 35 percent of its sales from cloud, analytics, mobile, social and security.
Analysts weren't expecting much from IBM's fourth quarter leading into the results. "We see a painful multi-year turnaround from here, which leads to a prolonged period of underperformance," said Kulbinder Garcha, Credit Suisse analyst. "We do believe that large parts of IBM's business (hardware, operating systems, Services) are being impacted by the Cloud, which represents more than 40% of the business."
Indeed, IBM's technology service revenue fell 7 percent from a year ago and business services slid 10 percent. Software revenue fell 11 percent and hardware fell 1 percent.
IBM said on its follow-up conference call for its 2016 outlook that it was expecting earnings of about $13.50 per share.
Wall Street was expecting earnings of $14.99 a share on revenue of $79.55 billion.
The company's stock ($IBM) stock was down 1.4 percent at market close, and down 3.6 percent in after-hours trading.