IBM CEO Defends Execution Amid Shift in Customer Spending

IBM's CEO Arvind Krishna admitted that the company fell short in its execution during the second quarter of fiscal 2026, citing a sudden shift in customer spending from software to AI-focused hardware components. The shortfall was attributed to a 'capex sensitive area' of IBM's portfolio, where clients prioritized supply chain-constrained infrastructure and cybersecurity-focused software over traditional offerings.

Krishna stated that this shift affected the closing of large deals, with around 10 of them slipping past their expected timelines. However, he noted that about one-third of these delayed deals have since closed, indicating a potential rebound in customer spending. IBM's CFO James Kavanaugh further explained that clients are prioritizing infrastructure investments ahead of expected price increases.

Krishna emphasized the company's conviction in its business strength and ability to grow, despite the challenges. He highlighted plans to increase AI adoption for software development, sales, marketing, and supply chain optimization, which should enhance margins and free cash flow commitments.