IBM CEO Downplays Software Shortfall as AI-Focused Deals Boost Growth Prospects
IBM's CEO Arvind Krishna acknowledged that the company had a 'software shortfall' in its second quarter of fiscal 2026, but expressed confidence that it was due to execution issues rather than a fundamental shift in customer spending priorities.
Krishna pointed out that IBM witnessed a sudden and dramatic change in client spending during the end of June, with customers shifting their focus towards supply chain-constrained hardware and cybersecurity-focused software. This led to a delay in closing large deals for IBM's core software and infrastructure competencies.
However, Krishna noted that about one-third of these delayed deals had already been closed since the quarter ended, indicating that it was a matter of timing rather than destruction. He attributed this positive development to IBM's efforts to adapt to client priorities and deliver greater business value through its innovation.
Krishna also highlighted IBM's plans to leverage AI to enhance software development, sales, marketing, and supply chain optimization. The company aims to increase the use of AI to improve margin and free cash flow commitments while expanding coverage across thousands of additional clients where its portfolio is highly relevant.