IBM plans to acquire cloud services provider HashiCorp for $6.4 billion in cash. 

HashiCorp has expertise in deploying multi- and hybrid-cloud infrastructures for enterprise clients, and the combination of the companies will “bolster our leading IT automation platform to address the sprawling complexity of AI-driven application and infrastructure growth,” Chief Executive Arvind Krishna said during IBM’s first-quarter earnings call April 24.

HashiCorp’s solutions are used by 85% of Fortune 500 companies, Krishna said, adding that the acquisition will allow IBM to build an open-source hybrid cloud and AI-driven products. 

The acquisition is expected to close by the end of 2024, Chief Financial Officer Jim Kavanaugh said during the earnings call. 

“Product synergies span across multiple strategic growth areas for IBM, including Red Hat, watsonx, data security, IT automation and consulting,” he said.

Seventy percent of HashiCorp’s revenue comes from the U.S., and IBM plans to implement HashiCorp’s services across its global footprint of 175 markets, Kavanaugh said. 

THE BIG PICTURE: IBM is seeing growth in its hybrid cloud and AI products, Krishna said. 

“We anticipate more clients moving from experimenting to deploying AI at scale to unlock productivity,” Krishna said. “Inception to date, our book of business related to watsonx and generative AI is greater than $1 billion with sequential quarter-over-quarter growth.” 

The Armonk, N.Y.-based company launched watsonx on May 9, 2023, according to an IBM release. 

Watsonx is being used by financial institutions including ABN AMRO, Citi, GM Financial and NatWest, according to the company’s website. 

BY THE NUMBERS: In Q1, IBM reported: 

• Total revenue of $14.5 billion, up 1% year over year; 
• Software revenue of $5.9 billion, up 5.5% YoY; and 
• Infrastructure revenue of $3.1 billion, up 0.2% YoY. 

WHAT THEY’RE SAYING: IBM’s acquisition of HashiCorp gives it a boost in developing and deploying AI products, according to a Bank of America Securities report published today. The note also stated that more acquisitions are expected. 

“We believe IBM will embark on further cost cutting, and enhance its services and software offerings through acquisitions,” the report stated. “Longer term, we expect IBM to take share in IT spending with its cloud and AI initiatives.” 

NOTEWORTHY: IBM recently teamed up with Royal Bank of Canada on a treasury and cash management tool, according to a release from IBM on April 16. 

The company will assist the bank in RBC’s digital customer-facing journey to help on-board customers, provide data insights and give a personalized experience, Matt Angelstad, vice president and senior partner in banking transformation at IBM, previously told BAN. 

FLASHBACK: While IBM is seeing growth potential in its AI-related services, the company’s cloud computing services are also growing, Krishna said. 

IBM acquired technology service provider Apptio last June for $4.6 billion, which has helped scale IBM’s offerings across hybrid cloud environments, he said. 

IBM also bought cloud provider Red Hat in 2019 for $34 billion. 

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