IBM CEO Touts Rebound, Optimism Amid Q2 Shortfall

IBM CEO Arvind Krishna acknowledged that the company experienced an 'execution' shortfall in its second quarter of fiscal 2026, but expressed optimism about a rebound. The shortfall was largely due to a shift in customer spending from IBM's core software and infrastructure competencies to AI-focused hardware components outside of its traditional offerings.

Krishna attributed this shift to clients prioritizing other capital expenditures, such as servers, storage, and memory purchases, ahead of expected price increases. This led to the failure to close a double-digit number of large deals on the expected timelines, accounting for the majority of the shortfall.

However, Krishna noted that IBM has already seen a shift back from this swerve, with about one-third of the affected deals closing in the first three weeks. He attributed this to the company's efforts to adapt and deliver greater business value to clients around its innovation and economic value alignment.

Krishna emphasized that IBM's conviction in the strength of its business remains unchanged and that it is well-positioned to help clients realize value in a secure, cost-effective, and scalable way through AI and software. The company plans to increase the use of AI to scale software development, bolster sales and marketing efforts, and optimize its supply chain.