IBM CEO Arvind Krishna has admitted the company underestimated how quickly customers would redirect technology spending towards artificial intelligence infrastructure. The admission came after the company reported weaker-than-expected preliminary second-quarter results, sending shares down 25 per cent…reports Asian Lite News Desk
IBM Chairman and CEO Arvind Krishna has acknowledged that the technology giant underestimated the scale of customers shifting their spending towards artificial intelligence (AI) infrastructure, admitting the company did not adapt quickly enough during the second quarter.
In a letter to investors released alongside selected preliminary second-quarter results, Krishna said IBM expected some supply chain-related challenges but did not anticipate the extent to which customers would prioritise investment in servers, storage and memory to secure AI infrastructure.
“What played out was worse than our expectations,” Krishna wrote.
“These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall,” he added.
IBM said customers shifted their technology budgets towards AI-related infrastructure during the final weeks of June, as companies moved to secure limited supplies ahead of expected price increases.
The company also pointed to wider cybersecurity concerns across the industry as another factor affecting customer decisions during the quarter.
IBM reported preliminary second-quarter revenue of $17.2 billion, representing a 1 per cent increase compared with the same period last year. However, the results triggered a sharp market reaction, with IBM shares falling 25 per cent.
The company’s performance varied across business segments. Software revenue increased by 5 per cent, while consulting revenue remained unchanged. Infrastructure revenue declined by 7 per cent during the quarter.
IBM’s diluted earnings per share fell 2 per cent to $2.27, while operating earnings per share on a non-GAAP basis rose 5 per cent to $2.93.
Krishna said the revenue shortfall was mainly linked to weaker-than-expected performance from IBM’s Z mainframe business and its related software portfolio, particularly transaction processing software.
Despite the setback, IBM said it remains focused on expanding its artificial intelligence and quantum computing capabilities. Krishna said the company continues to invest heavily in both areas as part of its broader business transformation strategy.
“While performance in the quarter was below our expectations, we have conviction in the strength of our portfolio and the strategic transformation of our business,” Krishna said.
The company said it is continuing to finalise its quarterly financial statements, with full second-quarter results scheduled to be released on 22 July.
The results come as major technology companies face increasing pressure to meet rising demand for AI infrastructure while managing supply constraints and shifting customer priorities. IBM’s experience highlights the rapid changes taking place across the technology sector as businesses accelerate investment in AI-powered systems.
