IBM CEO Blames Execution for Q2 Software Shortfall

IBM CEO Arvind Krishna acknowledged that the company's performance in the second quarter of its fiscal 2026 was impacted by a sudden shift in customer spending, which moved away from some of IBM's core software and infrastructure competencies.

Krishna attributed the shortfall to 'execution,' stating that it came down to how well the company executed on its business plans. He warned earlier this month in an investor letter about a big customer shift toward supply chain-constrained hardware and cybersecurity-focused software, which affected IBM's ability to close large deals.

CFO James Kavanaugh explained that the company witnessed a 'shift in client spending priorities' during the end of June, with clients prioritizing servers, storage, and memory purchases ahead of expected price increases. This led to IBM failing to close a double-digit number of 'large deals' on their expected timelines, accounting for most of the shortfall.

Krishna noted that about one-third of those shifted deals had since closed, indicating that it was likely a deferral rather than destruction. He expressed confidence in the company's business and ability to grow and drive shareholder value, despite the challenging technology spending environment.