IBM's Krishna Touts Rebound Amid Execution Shortfall in Q2

IBM's CEO Arvind Krishna acknowledged that the company experienced an 'execution' shortfall in its second quarter of fiscal 2026. The shortfall was primarily due to a sudden shift in customer spending from specific parts of IBM's software portfolio to AI-focused hardware components.

During the earnings call, Krishna stated that this shift moved away from some of IBM's core software and infrastructure competencies. He also mentioned that the company failed to close a double-digit number of large deals on time, accounting for the majority of the shortfall.

Krisha later clarified that about one-third of those shifted deals have since closed in the first three weeks, which he believes is an indication that this was deferral and not destruction. He emphasized that the company's conviction in its business remains unchanged and expects to adapt to deliver greater business value to clients around innovation.

Krisha also highlighted plans to increase the use of AI to help scale software development, bolster IBM's sales and marketing efforts, and optimize its supply chain. The company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, are expected to power a majority of IBM's high-margin subscription-based recurring software revenues.