IBM Sees Rebound After Software Shortfall
IBM's CEO Arvind Krishna acknowledged that the company had experienced an execution shortfall in its second quarter of fiscal 2026, but noted that it was already seeing a rebound. The shortfall was primarily due to a shift in customer spending from certain areas of IBM's software portfolio to AI-focused hardware components outside of the company's traditional offerings.
Krishna explained that this shift had resulted in some large deals being delayed or put on hold, but that the company had already closed about one-third of these deals. He attributed this to the fact that clients were prioritizing other capital investments and focusing on securing supply-constrained infrastructure ahead of expected price increases.
The CEO emphasized that IBM's software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, had been performing well, with record bookings and strong revenue growth. He also highlighted the company's plans to increase the use of AI to enhance its sales and marketing efforts, optimize its supply chain, and improve its ability to capture growth opportunities.