IBM has reported its first quarter earnings for 2024, revealing its plans to acquire HashiCorp, a cloud software maker. The acquisition is valued at $6.4 billion, with IBM intending to pay $35 per share in cash for HashiCorp. The deal is expected to be accretive to earnings before interest, taxes, depreciation, and amortization in the first year post-close, and to free cash flow in the second year. If the acquisition goes through, HashiCorp’s CEO, Dave McJannet, will report to IBM’s senior vice president in charge of software, Rob Thomas.
HashiCorp’s offerings are seen as a complement to Red Hat, which IBM acquired for $34 billion in 2019. HashiCorp specializes in open-source software that developers use to manage cloud infrastructure, particularly through products like the Terraform cloud-management software. While HashiCorp has been adding revenue at a faster pace than IBM, its revenue growth has slowed, and the company has been reporting losses. The announcement of the acquisition caused HashiCorp’s shares to rise by 4% in extended trading.
In its first quarter results, IBM reported earnings per share of $1.68 adjusted, exceeding the expected $1.60, while its revenue of $14.46 billion slightly missed the expected $14.55 billion. IBM’s revenue increased by around 1.5% year-over-year, marking its third revenue miss in the last five quarters. Revenue breakdown showed software revenue at $5.90 billion, slightly below analyst expectations, consulting revenue at $5.19 billion, and infrastructure revenue at $3.08 billion.
During the quarter, IBM provided its consultants with artificial intelligence assistants to enhance productivity and completed the divestiture of The Weather Company to Francisco Partners. Despite the after-hours drop in shares following the acquisition news, IBM’s overall performance in the stock market has been positive, with shares up by 13% year-to-date, outperforming the S&P 500 index.
IBM executives are set to discuss the earnings report with analysts during a conference call starting at 5 p.m. ET. The acquisition of HashiCorp and the company’s performance in the first quarter of 2024 mark significant developments for IBM in the evolving tech and cloud software landscape.
