IBM CEO Blames Execution Issues for Software Sales Shortfall

IBM CEO Arvind Krishna acknowledged that the company experienced a shortfall in its software sales during the second quarter of fiscal 2026, but claimed it was not due to a decline in demand. Instead, he attributed the shortage to the 'execution' aspect, stating that IBM had fallen short in meeting customer expectations.

Krishna explained that a sudden shift in client spending priorities towards supply chain-constrained hardware and cybersecurity-focused software led to a delay in closing large deals. He noted that about one-third of these delayed deals have since closed, with the majority expected to close within six months.

CFO James Kavanaugh added that IBM witnessed a 'shift in client spending priorities' at the end of June, with customers opting for servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. He emphasized that this shift was not a decline in demand but rather a change in investment priorities.

Krishna also highlighted IBM's plans to increase its use of AI to scale software development, bolster sales and marketing efforts, and optimize its supply chain. The company is accelerating changes to its go-to-market model to expand coverage across thousands of additional clients where its portfolio is highly relevant.