IBM Software Shortfall Due to Execution Issues, Not Shift in Customer Spending
IBM CEO Arvind Krishna attributed the company's second-quarter software shortfall to 'execution' issues, rather than a fundamental shift in customer spending. During IBM's Q2 earnings call, Krishna explained that the vendor saw a sudden and dramatic change in client behavior towards supply chain-constrained hardware and cybersecurity-focused software.
The CEO emphasized that this shift away from core software and infrastructure competencies was limited to capex-sensitive areas of the portfolio. CFO James Kavanaugh added that IBM witnessed a 'shift in client spending priorities' during the end of June, with clients opting for servers, storage, and memory purchases ahead of expected price increases.
IBM failed to close a double-digit number of large deals on the timelines they expected, accounting for the majority of the shortfall. However, Krishna claimed that about one-third of these shifted deals had since closed, indicating 'deferral rather than destruction.'