IBM CEO Blames Execution for Software Shortfall, Sees Future Growth

IBM CEO Arvind Krishna attributed the company's recent software shortfall to execution issues, but expressed confidence in its future growth prospects. In a Q2 earnings call, Krishna pointed to a shift in customer spending from traditional software areas to AI-focused hardware components outside of IBM's core offerings.

According to CFO James Kavanaugh, this shift was driven by clients prioritizing supply chain-constrained infrastructure and cybersecurity-focused software, leading to the delay or cancellation of several large deals. However, Krishna noted that about one-third of these delayed deals had since closed, indicating a 'deferral' rather than 'destruction' of business.

Krishna emphasized IBM's commitment to adapting to changing client priorities and driving growth through innovation. He highlighted the company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, which power a majority of its high-margin subscription-based recurring software revenues.