IBM Sees Rebound After Software Shortfall
IBM's CEO Arvind Krishna attributed the company's recent software shortfall to execution issues rather than a fundamental problem with its business model. In the second quarter of fiscal 2026, IBM experienced a significant shift in customer spending from its traditional software portfolio to AI-focused hardware components.
Krishna explained that this shift was driven by clients prioritizing supply chain constrained infrastructure and cybersecurity focused software, which led to a delay in closing deals. He noted that about one-third of the delayed deals had since closed, giving IBM reason to believe that the issue was a deferral rather than destruction.
The company's CFO James Kavanaugh further clarified that this shift was a result of clients buying servers, storage, and memory to secure supply constrained infrastructure ahead of expected price increases. He emphasized that IBM's traditional software and infrastructure competencies were still strong, but the company needed to adapt to changing client priorities.