IBM Sees Rebound from Second-Quarter Software Shortfall

IBM CEO Arvind Krishna acknowledged that the company's second-quarter software shortfall was largely due to execution issues, but expressed confidence in IBM's ability to adapt and grow.

The shortfall was attributed to a shift in customer spending priorities towards AI-focused hardware components and cybersecurity software, which has put pressure on IBM's traditional software offerings. However, Krishna noted that the company has already seen a rebound, with about one-third of the 'low 10s' deals that were delayed having since closed.

Krishna emphasized that IBM is well-positioned to help clients realize value in a secure, cost-effective, and scalable way, particularly as they determine how to deploy AI. The company plans to increase its use of AI to scale software development, bolster sales and marketing efforts, and optimize its supply chain.

IBM's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, have also contributed to the company's momentum. Krishna pointed out that these operations power a majority of IBM's high-margin subscription-based recurring software revenues, with notable successes in record bookings for HashiCorp and strong start for Confluent.