IBM’s bets on AI and hybrid cloud pay off

IBM buying spree isn’t over

Red Hat and IBM already had a history of both competing against and partnering with each other on major cloud deployments, and the combined company stressed that it would continue to operate in this fashion. The two companies have also been strong advocates for open-source software, and with Red Hat’s experience monetizing open-source technologies, such as Linux, Kubernetes, Ceph, and more, the IBM-Red Hat combo could help spread open-source further throughout cloud infrastructure, while also offering a way out of cloud vendor lock.

Not all partners, customers, and employees were thrilled with the newly combined company, however. Red Hat’s hometown newspaper in Raleigh, N.C., ran a series of articles channeling the local fear that IBM would inevitably transform Red Hat into a different sort of organization, stripping it of its more innovative impulses. The negative sentiments accelerated last year when Red Hat laid off approximately 4% of its workforce. Critics warned that this marked the beginning of the end of Red Hat’s rebel culture.

Yet, when IBM acquired Red Hat, the open-source organization was generating annual revenues of $3.3 billion. Now, under IBM’s wing, Red Hat-driven cloud software revenues hit $7.5 billion in Q4 2023, a 3.1% increase from the year prior and a continuation of a trend of steady growth that makes the high sticker price for this acquisition look reasonable.