IBM Rebounds from Q2 Earnings Shortfall, Adapts to Changing Customer Spending Habits
IBM CEO Arvind Krishna admitted to 'execution' shortfalls in the second quarter of its fiscal 2026, but expressed confidence that the company is adapting to changing customer spending habits.
Krishna attributed the shortfall to a shift in client priorities towards supply chain-constrained hardware and cybersecurity-focused software, which moved away from some of IBM's core software and infrastructure competencies.
CFO James Kavanaugh explained that this shift led to a delay in closing large deals on the expected timelines, accounting for the majority of the shortfall. The number of affected deals was reportedly in the 'low 10s', but about one-third have since closed.
Krishna emphasized that IBM is adapting to these changes and has seen some rebound. He highlighted plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain.