IBM's Q2 Software Shortfall Due to Execution Issues, Not Shift in Demand

IBM CEO Arvind Krishna acknowledged that the company experienced a software shortfall in its second quarter of fiscal 2026, but attributed it to execution issues rather than a fundamental shift in customer demand.

The shortfall was largely due to a sudden and dramatic shift by customers towards supply chain-constrained hardware components and cybersecurity-focused software, which moved away from IBM's core software and infrastructure competencies. This led to the company failing to close a number of large deals on time, contributing to the shortfall.

However, Krishna noted that about one-third of those shifted deals have since closed, indicating that the delay was likely due to deferral rather than destruction. He expressed confidence in the strength of IBM's business and its ability to grow and drive shareholder value.

Krishna also highlighted plans to increase the use of AI to help scale software development, bolster sales and marketing efforts, and optimize supply chains. The company is accelerating changes to its go-to-market model to expand coverage across thousands of additional clients where its portfolio is highly relevant.