IBM Executes on Adaptation Amid Shift in Customer Spending Priorities

IBM CEO Arvind Krishna attributed the company's shortfall in the second quarter of its fiscal 2026 to 'execution' issues, rather than a fundamental shift in customer demand.

Krishna and CFO James Kavanaugh explained that IBM witnessed a sudden change in client spending priorities at the end of June, with customers focusing on servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.

This led to IBM missing out on a number of large deals, which Krishna estimated were in the 'low 10s', although the company has since engaged with clients to adapt its approach and deliver greater business value.

Despite this setback, Krishna expressed confidence in IBM's ability to grow and drive shareholder value, pointing to the company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, which have powered a majority of its high-margin subscription-based recurring software revenues.