IBM Sees Rebound After Execution Shortfall in Second Quarter

IBM's second quarter of its fiscal year 2026 saw a shortfall in software sales due to a sudden shift in customer spending towards AI-focused hardware components and cybersecurity software, outside of IBM's traditional offerings. CEO Arvind Krishna attributed the execution shortfall, stating that 'it comes down to execution.' He noted that about one-third of the deals that slipped have since closed.

The company witnessed a shift in client spending priorities during the end of June, with clients moving towards servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases. This led to IBM failing to close a double-digit number of large deals on the timelines they expected.

Krishna pointed out that IBM has been adapting to deliver greater business value to clients around its innovation and greater economic value to better align with client priorities. The company has also increased the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain.