IBM (IBM +0.42%) is buying Confluent (CFLT +29.19%) -- that's the big tech headline this morning -- and it's driving shares of the data streaming platform 29.2% higher through 11:50 a.m. ET Monday.
IBM stock is also up, but only 1.5%.
Image source: Getty Images.
Details, please
In a press release this morning, IBM announced the deal as a signed, definitive agreement to acquire all outstanding stock of Confluent for $31 cash. As the company explains, "Confluent excels at preparing data for AI, keeping it clean and connected across systems and applications, eliminating silos inherent in agentic AI." Bringing Confluent in-house will give IBM a "smart data platform for enterprise IT, purpose-built for AI," boosting IBM's own artificial intelligence business. As IBM points out, Confluent's own total addressable market has already doubled in size over the past four years, reaching approximately $100 billion.
Assuming shareholders give their blessing and regulators allow the deal to proceed, Confluent could become part of IBM as early as H1 2026.
NASDAQ: CFLT
Key Data Points
Can Confluent make IBM stock a buy?
IBM's paying a small premium for Confluent stock, about 6.7 times trailing sales, versus IBM's own price-to-sales valuation of 4.5x. It may be worth the premium price, though, if Confluent can help substantially accelerate IBM's growth rate.
Can it, though? Analysts peg IBM for 7% earnings growth over the next five years, versus 24% for Confluent -- that's a point in the acquisition's favor. At 37 times earnings, though, IBM stock looks overpriced for its growth rate, and honestly, I think it's going to remain overpriced even after acquiring Confluent.
While Confluent is growing quickly, its revenue today is just a drop in the IBM bucket -- $65.4 billion deep. Adding Confluent's $1.1 billion, I fear, won't be enough to turn IBM stock into a buy.
