IBM moves to buy Confluent in an $11 billion cloud and AI deal

IBM plans to buy Confluent in an $11 billion deal, a move that expands its data and cloud portfolio as demand for AI systems grows. The company has been building up its cloud and software units under CEO Arvind Krishna, who has focused on acquisitions to meet interest from clients upgrading their systems for more complex AI work.

Confluent, based in Mountain View, California, builds tools that handle large, real-time data flows. These tools are often needed to train and run AI models.

“IBM and Confluent together will enable enterprises to deploy generative and agentic AI better and faster,” Krishna said. He added that the purchase will allow IBM to offer a data platform built for enterprise IT teams working with AI.

How the deal came together

Talks between the two companies first took place over the summer, according to a source familiar with the discussions. They began with informal conversations tied to IBM’s partner network. After IBM expressed interest, Confluent brought in advisers and opened a formal bidding process. IBM ultimately secured the deal, the source said.

As part of the agreement, Confluent CEO and co-founder Jay Kreps will join IBM Software and report to Rob Thomas, an IBM spokesperson said.

IBM worked with Centerview on the transaction, while Confluent hired Morgan Stanley. Cooley served as Confluent’s legal adviser, and Paul Weiss advised IBM.

IBM is offering $31 per share, a roughly 34% premium to Confluent’s prior close. Confluent’s stock jumped nearly 30% after the news, while IBM shares rose slightly. The stock has climbed almost 44% since Oct. 7, the last session before Reuters reported that Confluent was exploring a sale.

“IBM is buying the critical data firehose that supports the AI hype,” said Michael Ashley Schulman, chief investment officer at Running Point Capital. “With this purchase, IBM improves … recurring revenue, tightening its grip on large enterprises.”

IBM’s acquisition strategy

IBM has relied on acquisitions for years to add scale and compete in cloud services. It bought HashiCorp in 2024 for $6.4 billion and acquired Red Hat in 2019 for $34 billion, a deal that analysts say reshaped its cloud business.

The company expects the Confluent purchase to improve adjusted core earnings in the first full year after the deal closes. It also expects the deal to increase free cash flow by the second year. Wedbush said in a note that the acquisition adds more data processing strength to IBM’s hybrid cloud push and helps companies break down data silos for AI use. “We loudly applaud this deal as Arvind takes IBM further into the AI Revolution with more acquisitions likely ahead,” the analysts wrote. The firm kept its overweight rating and $325 price target. IBM last closed at $307.94.

The addition of Confluent follows recent moves to expand IBM’s software base, including the purchase of HashiCorp last year and Apptio the year before in a $4.6 billion deal. Both were all-cash transactions.

Confluent has more than 6,500 customers in major industries, including over 40% of Fortune 500 companies. It also works with major cloud and AI providers such as Anthropic, AWS, Google Cloud, Microsoft, and Snowflake. IBM said this fits with its approach of working across a wide partner network.

Under the deal terms, IBM will buy all outstanding Confluent shares for $31 each in cash, valuing the company at $11 billion. IBM will use its available cash to fund the purchase.

Both companies’ boards have approved the agreement. The deal still needs approval from Confluent shareholders and regulators. Confluent’s largest investors, who hold about 62% of the company’s voting power, have agreed to support the transaction. They also agreed not to back alternative offers.

The companies expect the deal to close by mid-2026.

(Photo by Sam Pak)

See also: IBM extends serverless computing to GPU workloads for enterprise AI and simulation

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