IBM Executive Admits Execution Shortfall Amid Customer Spending Shift

IBM CEO Arvind Krishna acknowledged that the company experienced an execution shortfall in its second quarter of fiscal 2026, leading to a software shortfall. This was attributed to a sudden shift in customer spending from IBM's traditional software portfolio to AI-focused hardware components.

The shift occurred at the end of June, with customers prioritizing servers, storage, and memory purchases due to supply chain constraints and expected price increases. This led to IBM failing to close a double-digit number of 'large deals' on the expected timelines, accounting for most of the shortfall.

However, Krishna noted that about one-third of these shifted deals have since closed, which he sees as an indication that this was a deferral rather than destruction. He expressed confidence in IBM's business and ability to grow and drive shareholder value, despite the challenges.

Krishna also highlighted plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize the supply chain. The company is accelerating changes to its go-to-market model to expand coverage across thousands of additional clients where its portfolio is highly relevant.