IBM's $11 billion Confluent deal landed in a software line growing 0% organically
IBM closed its $31-a-share, $11 billion cash purchase of Confluent in March and folded it into software, the segment that printed 5% reported growth in June and zero organic. The Q3 report will show how much of that line IBM signs and how much it simply buys.
Vincent Jiang · 3 min read
An $11 billion cheque that barely made a sound
Jay Kreps built Confluent to "set the world's data in motion," and in March he sold the company he co-founded for $31 a share in cash, about $11 billion of enterprise value 1. IBM dated the completion 17 March 2026, months ahead of its own mid-2026 target for a deal announced on 8 December 2025 456. The specialist press gave the close a single line, buried in a conference preview 3.
6,500 clients, eleven times sales, still a $345 million loss
Confluent came with more than 6,500 enterprise clients, over 40% of the Fortune 500, and partnerships spanning Anthropic, AWS and Snowflake 6. Its last standalone year produced $963.6 million of revenue and a $345 million net loss 7. IBM paid roughly eleven times trailing sales, from cash on hand, for a business still losing money, and says the deal lifts adjusted EBITDA in year one and free cash flow in year two 6.
Software: 10.6% last year, 5% reported, zero organic
Software is IBM's engine: $30.0 billion of fiscal 2025 revenue, 44% of the company, growing 10.6% against 7.6% overall 2. Then the June quarter. Software rose 5% as reported, but management said organic growth was flat, with tens of large deals slipping while clients bought servers, storage and memory first 2. Company-wide revenue grew 1.1% 9. Confluent, consolidated since March, counts in the reported number and not the organic one.
Even with Confluent aboard, IBM's company-wide growth fell to 1.1% in June
Data
| Revenue, year on year | |
|---|---|
| Q3 '23 | 4.6% |
| Q4 '23 | 4.1% |
| Q1 '24 | 1.5% |
| Q2 '24 | 1.9% |
| Q3 '24 | 1.5% |
| Q4 '24 | 1% |
| Q1 '25 | 0.5% |
| Q2 '25 | 7.7% |
| Q3 '25 | 9.1% |
| Q4 '25 | 12.1% |
| Q1 '26 | 9.5% |
| Q2 '26 | 1.1% |
Bought growth, a cut guide
IBM software growth: 10.6% last year, 5% reported in June, zero organic
- Software revenue growth
- Estimate
Data
| Software revenue growth | |
|---|---|
| FY2025 | 10.6% |
| Q2 FY26 reported | 5% |
| Q2 FY26 organic | 0% |
| FY2026 guide (estimate) | 7% (6–8%) |
Every point of June's software growth was acquisition revenue. Management cut the 2026 software outlook to 6 to 8%, and said about a third of the slipped deals had closed by the 22 July call 28. The stock sits 22.3% down year to date, 31% below its high, at 19.8 times earnings against 21.4 for the S&P 500 2.
Agents cannot run on stale data, says IBM
IBM's case is that agents cannot run on stale data: "AI decisions need to happen just as fast" as transactions, said Rob Thomas, who runs IBM Software 1. The receipts are Confluent's own case studies, company-claimed: Michelin's estimated 35% saving on running Kafka, BMW streaming factory data from more than 30 plants 110. Real enough, and silent on the one line investors trade, which is organic growth.
The tell: the Q3 organic print
Organic software growth above flat in the third quarter says June's deals were delayed; flat or lower says hardware still eats first 2. The first Confluent Current under IBM runs 4 to 5 November in San Francisco, more than 80 sessions, the programme tilting hard toward agents, under Shaun Clowes, general manager of Confluent and Data at IBM 3. Five points of software growth were bought in June. None were signed.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
