IBM announced buying HashiCorp in $6.4 Billion deal to expand in Cloud

IBM's "AI book of business" exceeded $1 billion in the first quarter, indicating sequential growth and including actual sales and bookings from various offerings

International Business Machines (IBM) announced its acquisition of HashiCorp in a deal valued at $6.4 billion, aiming to expand its cloud-based software offerings and capitalize on the growing demand for AI-powered solutions. Amid cautious spending in its consulting business due to higher interest rates, software has emerged as a bright spot for IBM. The acquisition will see IBM pay $35 per share for HashiCorp, representing a 42.6% premium to Monday's closing price. Following media reports of the deal talks, HashiCorp's shares surged on Tuesday and rose over 4% in extended trading on Wednesday, while IBM experienced a 7% decline after reporting first-quarter revenue slightly below estimates, with total revenue at $14.46 billion compared to LSEG estimates of $14.55 billion. Sales in the consulting segment remained flat during the quarter.

IBM's CFO, Jim Kavanaugh, noted the impact of uncertain macroeconomic conditions on client spending, particularly in discretionary areas. Accenture had previously reduced its fiscal-year 2024 revenue forecast in response to clients scaling back spending on consulting services. Despite challenges, IBM's software business saw 5.5% growth in the first quarter. The company has been increasingly focusing on its cloud business to address the growing need for data storage and processing in AI programs. For the quarter ending in March, IBM reported adjusted earnings of $1.68 per share, surpassing analysts' average estimate of $1.60.