International Business Machines (IBM) could strengthen its AI and hybrid cloud positioning with the acquisition of data streaming platform Confluent (CFLT), Oppenheimer said in a Tuesday note.

The all-cash deal, valued at $11.4 billion or $31 per share, is in line with IBM's strategy to incorporate real-time data streaming and analytics into its software portfolio, the investment firm said.

Confluent's products, based on open-source technologies including Apache Kafka and Apache Flink, enable real-time data streaming, processing, governance, and connectivity to data lakes and warehouses. The company also offers a cloud-based product on its re-architected Kafka engine.

Oppenheimer noted that despite the platform's capabilities, Confluent has only 6,463 paying customers compared with more than 150,000 organizations using open-source Kafka, due to the technology's complexity.

IBM's consulting and technical resources could drive adoption across the broader Kafka ecosystem, potentially adding 20% to 50% incremental revenue within 12 to 18 months.

The note highlighted that Confluent's real-time capabilities support AI inferencing, distinct from AI training, and will enhance IBM's watsonx suite and Retrieval Augmented Generation functions, strengthening its position against AI-focused infrastructure software vendors.

Oppenheimer reiterated an outperform rating on IBM with a $360 price target.

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