IBM's Q2 Software Shortfall Attributed to Execution Issues

IBM CEO Arvind Krishna attributed the company's software shortfall in the second quarter of its fiscal 2026 to execution issues, not a fundamental shift in customer spending.

The shortfall was due to a 'shift in client spending priorities' toward supply chain-constrained hardware and cybersecurity-focused software, which moved away from IBM's core software and infrastructure competencies, said CFO James Kavanaugh.

IBM witnessed a sudden shift in spending during the end of June, with clients prioritizing servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases.

Krishna stated that about one-third of the 'low 10s' deals that slipped have since closed. He added that normally only two-thirds to three-fourths of these deals would close over the next six months, so the early closure is a positive sign.