IBM Buys Confluent for $11 Billion to Bolster AI Offerings

IBM’s latest acquisition reflects broader industry appetite for data companies.

A sign marks the entrance to IBM Corporate Headquarters in Armonk, N.Y. Stan Honda/AFP via Getty Images

IBM stated on Dec. 8 that it will purchase real-time data-streaming platform Confluent in an all-cash deal worth $11 billion.

The new agreement will see IBM purchasing all issued and outstanding common shares of Confluent for $31 per share in cash, with the transaction expected to close by mid-2026.

“IBM and Confluent together will enable enterprises to deploy generative and agentic AI better and faster by providing trusted communication and data flow between environments, applications and [application programming interfaces],” IBM CEO Arvind Krishna said in a statement.

“Data is spread across public and private clouds, data centers, and countless technology providers.”

Over the past year, the tech giant has been expanding its suite of artificial intelligence (AI) products and services, completing all-cash, multibillion-dollar acquisitions.

The Confluent deal builds on the Big Blue’s $6.4 billion purchase of cloud software maker HashiCorp last year and its $4.6 billion deal for Apptio in 2023.

Confluent has a customer base of approximately 6,500 across several industries. Its significant partnerships include Amazon’s AWS, AI startup Anthropic, Google Cloud Platform, Microsoft, and Snowflake.

“Since its founding, Confluent has helped organizations unlock the full potential of their data, driving innovation in an increasingly complex IT landscape,” Jay Kreps, CEO and co-founder of Confluent, said in a statement.

“We are extremely proud of the work we’ve done in providing clients with a real-time data-streaming platform for the next era of technology, including generative and agentic AI.”

Shares of Confluent rocketed 29 percent in premarket trading. Prior to the news, the stock had slumped by 18 percent this year. It has a market cap of more than $8 billion.

IBM shares slumped by about 1 percent before the opening bell. Year to date, the $300 billion tech stock has soared by 40 percent.

Wall Street has presented mixed views about IBM’s future. The stock currently has a “moderate buy” rating but a 5 percent downside 12-month price target, according to MarketBeat.

IBM’s third-quarter earnings report in October topped estimates, reporting stronger-than-expected revenues and full-year guidance. However, the company also reported slower growth in its core cloud software segment in the last quarter, with revenues surging by 14 percent year-over-year, down from 16 percent in the previous quarter.

Its deeper push into software has led to ballooning cloud spending, reflecting a broader industry trend. Companies across sectors have been accelerating to build generative AI capabilities, fueling demand for data infrastructure providers.

Investment in building out AI capabilities, from data centers to training models, has substantially increased, with spending ramping up this year.

“AI requires enormous upfront capex [capital expenditure]—data centers, chips, thousands of miles of fiber, new power infrastructure, cooling systems, real estate, and cloud capacity that makes prior generations of computing look like child’s play,” Mark Malek, CIO at Siebert Financial, said in a note emailed to The Epoch Times.

A data center owned by Amazon Web Services (front R) is under construction next to the Susquehanna nuclear power plant in Berwick, Pa., on Jan. 14, 2024. AP Photo/Ted Shaffrey

Despite strong balance sheets from the businesses leading the AI charge—Alphabet, Amazon, Meta, Nvidia, and Oracle—companies have been turning to debt markets to help fund a portion of the new technology’s investments, Malek notes.

A growing concern in capital markets is that tech companies could overwhelm the bond market by issuing debt to fund AI and data center buildouts. Investors have already started scrutinizing whether these outsized investments in AI will ultimately pay off.

“Capital for that infrastructure must come from somewhere. For many firms, it will come from retained earnings. But for almost all of them, it will also come from the bond market because debt is still the cheapest and most efficient capital source for long-duration projects,” Malek said.

So far this year, the corporate tech industry has raised about $100 billion through recent bond offerings, according to a recent Bank of America analysis.

Reuters contributed to this report.