IBM is consuming data streaming provider Confluent in an $11 billion deal targeted at bolstering Big Blue’s growing software empire.

The proposed deal will see IBM acquire Confluent for $31 per share, which is a 30% premium over Confluent’s stock price prior to the deal being announced. The deal has garnered support from investors controlling approximately 62% of Confluent’s voting stock.

Confluent was founded in 2014 by the original creators of open source Apache Kafka, a distributed streaming messaging system. That platform is used to provide real-time event streaming to support business functions.

Confluent currently sports a number of offerings based on the Kafka data streaming platform, including its fully managed Confluent Cloud, self-managed Confluent Platform, its WarpStream hybrid, and Confluent Private Cloud platforms.

These are being used by a substantial base of more than 6,500 customers, including work with more than 40% of the Fortune 500. Confluent also counts partnerships with other vendors like Anthropic, Amazon Web Services (AWS), Google Cloud Platform (GCP), Microsoft, and Snowflake.

IBM rationalized the deal by stating Confluent’s platform will bolster its standing data and automation portfolio. This will include having Confluent’s results being reported as part of IBM’s Data group that resides within its Software division.

Confluent reported $298.5 million in revenues for its most recent fiscal quarter, which was a 19% year-over-year increase. Nearly all of that revenue came from subscriptions.

Forrester Research ranked Confluent as a top streaming data platform provider in its most recent “Wave” ranking, placing the vendor in front of rivals like Microsoft, Google, Ververica, and Oracle. Others in the segmented ranking include Cloudera, Amazon Web Services (AWS), and Snowflake.

IBM stated that it expects the deal to close by the middle of next year, and that Confluent assets would be accretive to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) within the first full year and to free cash flow during year two.

IBM also noted that Confluent’s open-source underpinnings ties-in with IBM’s past acquisitions of open source-leaning vendors Red Hat and HashiCorp, and that it will boost IBM’s hybrid cloud-focused AI services.

“We focus on structurally growing markets aligned to our strategic priorities where we can add unique value and deliver synergies across IBM. That’s exactly what we see with our acquisition of Confluent,” IBM CEO Arvind Krishna said during a briefing on the deal. “Confluent will enable IBM to deliver a modern, open, smart data platform for generative AI that enables integration of applications, AI agents, and data systems, driving intelligence and resilience in hybrid-cloud environments.”

This delivery can link IBM’s Red Hat and automation products with its “hybrid deployment approach to AI, including Red Hat OpenShift, WatsonX, and Orchestrate,” Krishna added.

“From a technology and portfolio-fit standpoint, we believe the deal makes strategic sense, particularly given the complementary nature of Confluent’s data streaming platform with IBM’s expanding hybrid cloud, automation, and data (plus) AI software footprint,” equity research firm William Blair noted in a report on the deal.

That complementary nature includes what the equity research firm noted was a “data-in-motion layer that complements an already expansive software portfolio spanning infrastructure automation and multicloud management (HashiCorp), Linux (Red Hat), containers (OpenShift), FinOps (Apptio), AIOps (Instana), and broader IT operations capabilities.”

IBM’s software boost

Krishna had previously hinted at IBM’s ongoing merger and acquisition (M&A) appetite, telling investors during the vendor’s most recent earnings call that “M&A is an extremely important part of our strategy.”

The deal is a substantial bet by IBM in further boosting its software operations.

IBM’s Software business, which includes both Red Hat and HashiCorp, is the single biggest segment revenue-generator for IBM, accumulating $7.2 billion in revenues during the vendor’s most recent fiscal quarter. Those results accounted for nearly 45% of IBM’s overall quarterly revenues and were a 10% increase compared to the same quarter last year.

Despite Confluent’s expansive reach into large enterprises, IBM CFO James Kavanaugh explained that integration will provide the ability to more deeply sell services into that enterprise space. This includes the ability for enterprise application developers to work through a more streamlined data portfolio to construct revenue-generating applications.

“Overall, we view the acquisition as a strategically logical step for IBM as it continues to reposition itself around hybrid-cloud infrastructure, automation, and AI-powered software. The deal expands IBM’s capabilities in one of the fastest-growing segments of the data infrastructure market and offers meaningful long-term potential if execution is strong,” the William Blair research note concluded.