IBM's Software Sales Struggle Due to 'Execution' Issues

IBM CEO Arvind Krishna acknowledged that the company experienced a shortfall in its software sales during the second quarter of fiscal 2026, attributing it to 'execution' issues. In an earnings call, Krishna stated that this was due to a shift in customer spending towards AI-focused hardware components outside of IBM's traditional offerings.

The CEO noted that around 10 large deals were impacted by this shift, with about one-third already closed and the rest expected to close over the next six months. He emphasized that this was a deferral rather than destruction, citing the fact that normally only two-thirds to three-fourths of such deals would close within that timeframe.

Krishna expressed confidence in IBM's business and its ability to drive shareholder value, highlighting plans to increase AI adoption for software development, sales, marketing, and supply chain optimization. He also pointed out that the company's recent software-focused acquisitions, including Red Hat, HashiCorp, and Confluent, are driving high-margin subscription-based recurring revenues.