IBM CEO Blames Execution Shortfall for Q2 Software Miss

IBM CEO Arvind Krishna admitted that the company's software shortfall in Q2 of fiscal 2026 was due to 'execution' issues, but noted that some deals have already rebounded.

The shortfall was attributed to a sudden shift in customer spending from IBM's traditional software portfolio to AI-focused hardware components outside of its core offerings. This led to the company failing to close a double-digit number of large deals on time, accounting for the majority of the shortfall.

However, Krishna claimed that about one-third of those shifted deals had since closed, with some clients prioritizing other capex investments such as servers, storage, and memory purchases ahead of expected price increases.

Krishna expressed confidence in IBM's business, citing plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain. He also highlighted the company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, which power a majority of IBM's high-margin subscription-based recurring software revenues.