IBM Rebound Hinges on Execution and AI-Powered Growth

IBM CEO Arvind Krishna acknowledged that the company fell short in executing on its software sales during the second quarter of fiscal 2026, but expressed optimism about a rebound. In an earnings call with investors, Krishna pointed to a sudden shift in customer spending from specific parts of IBM's software portfolio to AI-focused hardware components outside of its traditional offerings.

Krisha noted that this shift was particularly evident at the end of June, when clients prioritized servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. As a result, IBM failed to close a double-digit number of large deals on the timelines it expected, accounting for the majority of the shortfall.

However, Krishna pointed out that IBM has already seen a shift back from this swerve, with about one-third of the delayed deals having since closed. He expressed confidence in the company's ability to adapt and deliver greater business value to clients around its innovation and economic value alignment with client priorities.

Krishna also highlighted IBM's plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain. The company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, are expected to power a majority of IBM's high-margin subscription-based recurring software revenues.