Confluent Stock Soars on IBM Acquisition. IBM Is Getting a Really Good Deal.

IBM closes in on an acquisition of Confluent, according to The Wall Street Journal. (Miguel Medina/AFP via Getty Images)

Sometimes, investors freak out when a company makes a deal. That wasn’t the case with International Business Machines and its $11 billion purchase of Confluent , a deal that speaks to Big Blue’s lofty ambitions in artificial intelligence.

The storied tech giant said Monday that it would acquire all of Confluent’s issued and outstanding common stock for $31 a share, representing an enterprise value of $11 billion.

The subsequent stock reaction indicated the market was excited about the deal. IBM was up 1.6% to $312.90 at 11:35 a.m. on Monday following the announcement. Shares have surged more than 41% this year, outstripping a 16% gain for the benchmark S&P 500 .

Confluent stock, meanwhile, soared 29% to $29.85, putting the shares on pace for their largest same-day percent increase since a 34% jump in February 2024, according to Dow Jones Market Data. The stock was trading near the middle of its 52-week range on Monday.

Confirmation of the deal should come as no surprise to anyone watching the space. Reports surfaced just two months ago that Confluent was exploring a sale, D.A. Davidson analyst Rudy Kessinger recalled in a research note.

Along with Confluent and Amazon Web Services, IBM is one of the largest providers of managed Apache Kafka, a open-source distributed streaming system that processes data. In that regard, an acquisition “would not be all that surprising,” Kessinger wrote.

“Still, we would have expected Confluent would try and deliver more than one just quarter of strong results before selling,” he continued. Kessinger noted that Confluent shares could have likely appreciated to the deal value if Confluent posted several strong quarters in a row and showed “some stabilization in cloud growth.”

Instead, it settled for a deal now. The transaction is expected to close by the middle of 2026, subject to approval by Confluent shareholders, who hold roughly 62% of of the voting power of Confluent’s outstanding common stock. The board of directors of both IBM and Confluent already have approved the deal.

IBM said it expects the acquisition to be accretive to adjusted earnings before interest, taxes, depreciation, and amortization within the first full year of closing, and to add to free cash flow by the second.

The deal “fits with IBM’s focus on infrastructure software assets within the open source ecosystem,” Evercore ISI analyst Amit Daryanani said. He noted that the purchase of Confluent was “one of the larger softer deals IBM has done,” and comes on the heels of the $6.5 billion acquisition of cloud-infrastructure company HashiCorp earlier this year.

It’s just the latest deal in an AI-forward world where data has become a valuable form of currency and the management of said data has taken center stage. Confluent’s platform is used for managing data streams, which has become increasingly important for companies looking to integrate their private data into AI models.

IBM has demonstrated a commitment to AI, both through its products on the market today as well as through its burgeoning IBM Research division. The stock’s double-digit percentage gain this year comes as optimism abounds over IBM’s progress in the space.

The company said in October that it had agreed to a partnership with Anthropic to use the AI startup’s models in IBM software.

IBM has undergone several transformations since its founding as a maker of data-processing machines. Once a leader in the personal computer market, it sold that business in 2005.

Currently, it generates the bulk of its revenue from consulting and software, though it has also emerged as a leader in quantum computing as hype builds around the nascent technology.

For IBM, the future looks brighter than it has in a long time.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com and Adam Clark at adam.clark@barrons.com