IBM Bolsters Hybrid-Cloud Business With $6.4B HashiCorp Acquisition

Ahead of its earnings release, IBM announced its intention to acquire HashiCorp, a multi-cloud infrastructure automation company, for $35 per share in cash, with an enterprise value of $6.4 billion.

HashiCorp specializes in Infrastructure Lifecycle Management and Security Lifecycle Management, crucial for hybrid and multi-cloud environments. This move aligns with IBM’s focus on hybrid cloud and AI, which are vital for today’s businesses.

News of the acquisition comes just a month after reports surfaced that the company was looking for buyers.

Who is HashiCorp?

HashiCorp, founded in 2012, delivers open-source tools and commercial software products focused on cloud infrastructure automation, orchestration, and management. HashiCorp also offers commercial versions of its tools.

HashiCorp’s products help organizations manage infrastructure as code, automate application deployment, enhance security, and improve cloud infrastructure operations.

Its offerings include the popular Terraform for infrastructure automation, Vault for secrets management, Consul for service discovery and networking, and Vagrant for development environments. These tools streamline deploying and managing infrastructure in multi-cloud and hybrid cloud environments, facilitating DevOps practices and enhancing collaboration.

HashiCorp gained recognition for its commitment to open source, fostering a community-driven approach encouraging contributions and innovation. The company’s products are used by many organizations to automate infrastructure management and improve efficiency in software development and operations.

HashiCorp has over 4,400 clients, including large enterprises like Bloomberg, Comcast, and J.P. Morgan Chase. Its products, such as Terraform, Vault, Boundary, and Consul, are widely used in the developer community, with 85% of Fortune 500 companies using its services.

HashiCorp delivered strong revenue and earnings results in its most recent quarter, beating consensus estimates for revenue and earnings, but disappointed analysts with its lackluster guidance.

The company reported a 15% increase in revenue to $155.8 million, resulting in an annual revenue of $583.1 million, a 23% year-over-year uplift. Gross profit remained high, with GAAP at $128.8 million and non-GAAP at $133.5 million, maintaining margins of 83% and 86%, respectively. HashiCorp also improved its operating loss, which dropped to $48.3 million (GAAP) and $6.5 million, while its net loss decreased to $31.6 million (GAAP) and turned positive to $10.2 million.

Analyst’s Take

HashiCorp is a strong strategic fit with IBM’s strategic focus on hybrid and multi-cloud infrastructure, automation, and DevOps. The move reinforces IBM’s leadership in hybrid cloud solutions where it can leverage HashiCorp’s popular tools like Terraform, Vault, Consul, and Nomad, which are designed for flexible, interoperable infrastructure across various cloud platforms and on-premises environments.

The acquisition also expands IBM’s DevOps and automation portfolio. HashiCorp’s products, which support infrastructure automation, secrets management, service discovery, and workload orchestration, strengthen IBM’s offerings in response to the growing demand for automation in IT operations.

HashiCorp’s strong open-source community adds another advantage for IBM. The company can leverage HashiCorp’s vibrant ecosystem of developers and users, in line with IBM’s history of embracing open source. This could foster innovation and broaden IBM’s customer base.

Most critically, HashiCorp’s multi-cloud capabilities complement IBM’s hybrid cloud strategy. The flexibility of HashiCorp’s tools across multiple cloud providers helps IBM support customers in multi-cloud environments, aligning with the growing trend toward hybrid cloud solutions. IBM’s extensive customer base offers significant cross-selling opportunities with HashiCorp’s products, creating synergies with existing IBM services.

This deal positions IBM as a more comprehensive hybrid cloud provider, bridging the gap between traditional infrastructure and emerging AI-driven workloads. The combination of HashiCorp’s automation tools with IBM’s portfolio, including Red Hat and watsonx, creates a robust platform designed to navigate the complexities of modern IT infrastructure.

This gives IBM unique differentiator in the fiercely competitive hybrid-cloud market, allowing IBM to offer enterprise clients a unified solution that manages both public and private clouds as well as on-prem environments. This differentiation set IBM apart from its largest competitors while bolstering its ability to help enterprises benefit from hybrid cloud infrastructure.

Disclosure: Steve McDowell is an industry analyst, and NAND Research is an industry analyst firm that engages in, or has engaged in, research, analysis and advisory services with many technology companies, including those mentioned in this article. Mr. McDowell does not hold any equity positions with any company mentioned in this article.