IBM Bounces Back from Software Sales Shortfall

IBM CEO Arvind Krishna acknowledged that his company experienced a shortfall in software sales during its fiscal Q2 of 2026, but expressed confidence that it is already rebounding.

The shortfall was attributed to a shift in customer spending priorities towards supply chain-constrained hardware and cybersecurity-focused software, away from IBM's core software and infrastructure competencies.

According to Krishna, the number of shifted deals was in the 'low 10s', but IBM has since managed to close about one-third of them. He emphasized that this was a deferral rather than destruction, as he expects two-thirds to three-fourths of these deals to close within the next six months.

Krishna highlighted IBM's plans to increase its use of AI to scale software development, bolster sales and marketing efforts, and optimize its supply chain. He also pointed to recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, which are driving high-margin subscription-based recurring software revenues.