IBM Sees Rebound After Software Sales Shortfall

IBM's CEO Arvind Krishna acknowledged that the company experienced a shortfall in software sales during its second quarter of fiscal 2026, but emphasized that it was largely due to 'execution' issues rather than a fundamental shift in customer demand.

Krisha explained that IBM faced a sudden and dramatic change in customer spending patterns at the end of June, with clients prioritizing hardware purchases such as servers, storage, and memory over software and infrastructure investments. This shift resulted in the failure to close several large deals on time, which accounted for the majority of the shortfall.

However, Krishna also highlighted that IBM has since seen a rebound, with about one-third of the delayed deals already closed within the first three weeks after the earnings call. He attributed this turnaround to enhanced client engagement and a better understanding of their needs.

Krisha expressed confidence in IBM's business prospects, stating that its portfolio is well-positioned to help clients realize value from AI deployments. He also highlighted plans to increase the use of AI to enhance software development, sales, and marketing efforts, as well as optimize supply chains.