IBM Pins Q2 Software Shortfall on Execution Issues
IBM's Q2 earnings call highlighted a software shortfall in its fiscal 2026. CEO Arvind Krishna attributed this to 'execution' issues, rather than changes in customer demand.
The shift in spending priorities was toward supply-constrained hardware and cybersecurity-focused software, away from IBM's core offerings. This led to the vendor missing out on a double-digit number of large deals.
CFO James Kavanaugh explained that many clients purchase mainframe and associated software through enterprise license agreements, which create an incumbency moat for IBM. However, these deals were delayed due to client priorities shifting toward capex investments.
Krishna claimed that about one-third of the shifted deals have since closed, giving them 'good indication' that this was deferral rather than destruction.