IBM CEO Acknowledges Shortfall Amid Shift in Customer Spending Priorities

IBM CEO Arvind Krishna acknowledged that the company fell short in executing its plans for the second quarter of fiscal 2026, citing a 'shift' in customer spending priorities. This shift led to a shortfall in software sales, specifically in capex-sensitive areas, which are typically treated as capital investments.

According to CFO James Kavanaugh, clients were prioritizing other capital expenditures, such as servers, storage, and memory purchases, ahead of expected price increases. This resulted in the delayed closure of a 'low 10s' number of large deals, accounting for the majority of the shortfall.

Krishna noted that about one-third of these delayed deals have since closed, giving the company confidence that this was a temporary deferral rather than a destruction of revenue opportunities. He emphasized that IBM's conviction in its business and ability to grow remains unchanged.