Arvind Krishna says IBM's second-quarter revenue shortfall is a temporary speed bump as the company navigates a hardware price surge.
Arvind Krishna, the CEO of IBM, characterized the company's recent second-quarter revenue shortfall as a "temporary speed bump" caused by shifting client spending priorities. While the company reported $17.16 billion in revenue, the figure fell short of initial expectations as enterprises redirected capital toward supply-constrained hardware. Krishna explained that many large deals were delayed rather than lost, noting that roughly one-third of those transactions were finalized in early July. The infrastructure category saw a significant decline, with Z mainframe revenue falling 42% as customers faced 15% to 30% price increases on data center gear. Despite this, the administration of the company remains optimistic about long-term growth, maintaining an expectation to grow full-year free cash flow by $1 billion. Generative AI continues to be a primary driver of momentum, representing 50% of the quarter's signings. While the stock experienced its sharpest single-day decline on record following a pre-earnings warning, Krishna emphasized that clients are not moving away from the mainframe but are simply timing their purchases to manage skyrocketing costs.