IBM Sees Rebound from Q2 Software Shortfall, Touts AI Focus

IBM CEO Arvind Krishna acknowledged that his company experienced a 'execution' shortfall in its second quarter software sales, but expressed confidence in the strength of IBM's business and ability to grow. The shortfall was attributed to a sudden shift in customer spending from specific parts of IBM's software portfolio to AI-focused hardware components outside of IBM's traditional offerings.

Krishna noted that a 'low 10s' number of large deals slipped past their expected closing dates, but the company has since seen about one-third of those deals close. He attributed this shift to clients prioritizing capex investments in supply chain constrained infrastructure and cybersecurity software, leading to delays in mainframe and associated software stack purchases.

Krishna emphasized that IBM's conviction in its business remains unchanged and that it is adapting to deliver greater value to clients around innovation and better align with client priorities. He highlighted plans to increase AI use for scaling software development, bolstering sales and marketing efforts, and optimizing the supply chain.