IBM Sees Rebound from Software Sales Shortfall

IBM CEO Arvind Krishna acknowledged that the company's second-quarter software sales fell short of expectations, but pointed to a rebound in recent weeks. The shortfall was attributed to a shift in customer spending from IBM's traditional software and infrastructure offerings to AI-focused hardware components.

Krishna explained that this shift was driven by customers prioritizing supply chain-constrained hardware and cybersecurity-focused software over other areas. He noted that the company had failed to close a double-digit number of large deals on time, accounting for the majority of the shortfall.

However, Krishna pointed out that about one-third of those delayed deals have since closed, giving IBM 'a good indication' that this was a deferral rather than destruction. He expressed confidence in the company's business and ability to grow, citing plans to increase AI usage in software development, sales, and marketing.

Krishna also highlighted IBM's recent acquisitions, including Red Hat, HashiCorp, and Confluent, which power a majority of the company's high-margin subscription-based recurring software revenues. He noted that these operations have shown strong momentum, with record bookings for HashiCorp and a strong start for Confluent.