IBM Sees Rebound After Software Sales Shortfall
IBM's second quarter of fiscal 2026 saw a shortfall in software sales due to a sudden shift in customer spending towards AI-focused hardware components, according to CEO Arvind Krishna.
The vendor attributed this dip to clients prioritizing supply chain-constrained infrastructure and cybersecurity-focused software over some of IBM's core software and infrastructure competencies.
Krishna acknowledged that the company had fallen short in execution during the quarter, citing a limited shortfall to capex-sensitive areas of its portfolio.
However, he expressed confidence in the company's ability to adapt and deliver greater business value to clients around its innovation, while also aligning with client priorities. Krishna claimed that about one-third of the shifted deals had since closed, which he saw as a positive indication that this was a deferral rather than destruction.
IBM plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain, with the goal of enhancing margin and free cash flow commitments while improving growth capture.