IBM Blames Execution Shortfall for Second-Quarter Software Slump
IBM CEO Arvind Krishna attributed a shortfall in software sales to 'execution' rather than a shift in customer demand. The company's second-quarter earnings report showed a decline in capex-sensitive areas of its software portfolio.
Krishna explained that IBM witnessed a sudden and dramatic shift in customer spending from specific parts of its software portfolio to AI-focused hardware components outside of the company's traditional offerings.
However, Krishna noted that this shift was not a permanent trend. He stated that about one-third of the deals that were delayed have since closed, giving IBM 'a good indication' that this was a deferral rather than destruction.
The CEO also highlighted plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize supply chain operations. He pointed to recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, as key drivers of IBM's high-margin subscription-based recurring software revenues.