IBM Admits Execution Shortfall, Sees Rebound in AI-Focused Sales
IBM CEO Arvind Krishna acknowledged that the company experienced an 'execution' shortfall in its second-quarter software sales, but expressed confidence that the vendor is adapting to changing customer priorities. The shortfall was attributed to a sudden shift in client spending from IBM's core software and infrastructure competencies to supply chain-constrained hardware and cybersecurity-focused software.
Krishna noted that about one-third of the large deals that slipped had since closed, with the remainder expected to close over the next six months. He emphasized that this was a temporary deferral rather than destruction of business opportunities.
IBM's CFO James Kavanaugh explained that the shift in client spending priorities was driven by concerns over supply chain constraints and price increases for hardware components such as servers, storage, and memory. The company's software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, are expected to help drive growth and improve margins.