New Delhi–IBM Chairman and CEO Arvind Krishna acknowledged that the technology company underestimated the scale of customers’ shift toward artificial intelligence infrastructure spending and failed to adjust quickly enough during the second quarter.
In a letter to investors released alongside selected preliminary quarterly results, Krishna said IBM had anticipated some supply chain disruption but did not foresee the extent to which customers would redirect capital spending toward servers, storage and memory needed for 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.”
IBM said customers shifted portions of their quarterly technology budgets during the final weeks of June to secure supply-constrained infrastructure ahead of expected price increases. Rapidly evolving cybersecurity concerns across the industry also distracted customers during the quarter, the company said.
IBM reported preliminary second-quarter revenue of $17.2 billion, representing a 1 percent increase from a year earlier. The announcement sent the company’s shares down 25 percent.
Software revenue increased 5 percent, while consulting revenue remained unchanged and infrastructure revenue declined 7 percent.
Diluted earnings per share fell 2 percent to $2.27. Operating earnings per share, excluding certain items, increased 5 percent to $2.93.
Krishna said the revenue shortfall was primarily caused by weaker-than-expected performance in IBM’s Z mainframe business and its related software products, particularly transaction-processing software.
He said IBM continues to invest heavily in artificial intelligence and quantum computing despite the disappointing quarterly performance.
“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.
IBM is still finalizing its quarterly financial statements and plans to release its complete second-quarter results July 22. (Source: IANS)
