IBM's Red Hat Acquisition Will Pay for Itself by Early Next Year

IBM's acquisition of Red Hat, finalized in July 2019 for $34 billion, is projected to pay for itself by early 2025. The acquisition has revitalized IBM, contributing significantly to its market capitalization, which has increased from $104.9 billion in October 2018 to over $200 billion. Red Hat's revenue growth has been substantial, with an estimated $1.87 billion in the third quarter of 2024, marking a 14% increase. This growth has been crucial for IBM's systems business, which would have otherwise continued to decline. Red Hat now accounts for 17.5% of IBM's overall systems revenue, up from 9.2% in 2019. The company has also seen a notable increase in its generative AI consulting services, with a cumulative book of business surpassing $3 billion. Despite a challenging macroeconomic environment, IBM's overall revenues grew by 1.5% to $14.99 billion in the latest quarter, although it reported a net loss of $330 million due to increased costs and a pension settlement charge. The upcoming releases of the z17 and Power11 systems in 2025 are anticipated to further bolster IBM's performance.

- IBM's Red Hat acquisition is expected to pay for itself by early 2025.

- Red Hat's revenue grew by 14% in Q3 2024, significantly contributing to IBM's market capitalization.

- Red Hat now represents 17.5% of IBM's overall systems revenue.

- IBM's generative AI consulting services have seen substantial growth, exceeding $3 billion in business.

- Despite revenue growth, IBM reported a net loss of $330 million in the latest quarter.