IBM's Execution Shortfall Rebounds Amid Shift to AI-Focused Hardware
IBM CEO Arvind Krishna acknowledged that the company had a 'execution' shortfall in its second quarter of fiscal 2026, but expressed confidence that it is starting to recover.
The shortfall was due to a sudden shift in customer spending from IBM's core software and infrastructure competencies to AI-focused hardware components outside of the company's traditional offerings. This shift led to the failure to close a number of large deals on time, accounting for the majority of the shortfall.
Krishna stated that about one-third of the shifted deals had since closed, which he sees as a good indication that this was deferral and not destruction.
The CEO also highlighted IBM's plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize its supply chain. He emphasized that these actions will enhance margin and free cash flow commitments while improving the company's ability to capture growth ahead.