IBM Blames Execution Issues for Software Shortfall

IBM CEO Arvind Krishna attributed the company's software shortfall in Q2 of fiscal 2026 to execution issues, rather than a fundamental shift in customer demand. He pointed out that a 'capex sensitive area' of IBM's portfolio was impacted by a sudden and dramatic change in client spending priorities.

Krisha explained that clients were shifting their focus towards supply chain-constrained hardware and cybersecurity-focused software, away from some of IBM's core offerings. This led to a number of large deals being delayed or put on hold, which contributed to the shortfall.

However, Krishna was optimistic about the company's prospects for recovery, citing the fact that 'about' one-third of the affected deals had already closed in the first three weeks following the quarter end. He attributed this to the company's efforts to engage with clients and adapt its business model to meet their changing needs.

Krisha also highlighted IBM's plans to leverage AI to improve execution, including scaling software development, bolstering sales and marketing efforts, and optimizing supply chains. He noted that these initiatives would help enhance the company's margin and free cash flow commitments while improving its ability to capture growth opportunities.