IBM Sees Rebound from Software Shortfall as Customers Focus on AI
IBM CEO Arvind Krishna attributed the company's software shortfall in its second quarter of fiscal 2026 to 'execution', stating that it was not due to a lack of demand or a shift in market trends. However, he also noted that IBM had experienced a sudden and dramatic shift in customer spending from certain parts of its software portfolio to AI-focused hardware components outside of the company's traditional offerings.
This shift, which Krishna described as a 'client spending priorities' change, saw customers prioritizing the purchase of servers, storage, and memory ahead of expected price increases. This led to IBM failing to close several large deals on the timelines they had expected, accounting for the majority of the shortfall.
Krishna stated that about one-third of the shifted deals had since closed, with IBM adapting its approach to better align with client priorities and deliver greater business value through innovation.