IBM CEO: "Companies Begin Scrutinizing Returns on AI Investments More Closely"

Shares Fall Despite Strong Third-Quarter Results
Maintains Full-Year Revenue Growth Forecast
Barron's Says Doubts Persist Over Growth Sustainability

IBM CEO Arvind Krishna said that companies are scrutinizing more closely the actual returns on their artificial intelligence (AI) investments, according to remarks made on October 21 (local time).

IBM CEO Arvind Krishna, who was invited to a dinner held at the White House on July 6, 2026 (local time). AFP-Yonhap

During IBM's third-quarter earnings call that day, Krishna said, "Large companies are much more conscious of the tangible return on investment (ROI) from their AI spending," adding, "Some companies are concerned that AI spending could spiral out of control without generating tangible returns."

He said companies are also moving beyond the initial experimentation phase and beginning to consider how to integrate AI with existing information technology systems and apply it to real-world operations. He predicted that this would drive increased demand for enterprise software, data management, and hybrid cloud services.

At the same time, he expressed confidence in AI's economic impact. "The productivity gains and changes in how work is done that AI delivers are definitely real," Krishna said, while noting that "many companies underestimate how much effort it takes to integrate AI into their existing operations."

He emphasized that simply adding AI to existing workflows is unlikely to deliver sufficient results. "To fully realize AI's benefits, companies need to fundamentally redesign their workflows," he said. "Rather than spreading investment across 100 small experiments, it is important to select a small number of priorities and scale them across the entire company."

IBM's third-quarter results exceeded market expectations. Revenue rose about 5% year over year to $17.1 billion, surpassing the market estimate of $16.82 billion. Adjusted earnings per share (EPS) also beat expectations, coming in at $2.95 against an estimate of $2.86.

Growth in the software business was particularly strong. IBM said third-quarter software revenue grew 9% on a constant-currency basis. Chief Financial Officer Jim Kavanaugh said software revenue growth was 4 percentage points higher than in the previous quarter, explaining that "about 25% of the acceleration came from the signing of previously delayed contracts, while the remaining 75% came from new business."

IBM expects Red Hat revenue to grow at a double-digit rate in the fourth quarter. It also raised its forecast for this year's increase in free cash flow (FCF) from about $1 billion to more than $1 billion. However, it kept its full-year revenue growth forecast unchanged at 4% to 5% on a constant-currency basis.

Despite the better-than-expected results, IBM shares fell more than 4% in after-hours trading. They had closed up 3.94% in the regular session. Barron's, a financial markets publication, reported that although IBM raised its growth outlook for the software segment, market doubts persist over whether that growth can be sustained.

This content was produced with the assistance of AI translation services.