By Arsheeya Bajwa

(Reuters) - International Business Machines ( IBM ) will buy HashiCorp ( HCP ) in a deal valued at $6.4 billion, the company said on Wednesday, expanding its cloud-based software products to tap into an AI-powered boom in demand.

Software has been a bright spot for IBM ( IBM ) as its consulting business grapples with more cautious spending by enterprises navigating higher interest rates.

IBM ( IBM ) will pay $35 per share for HashiCorp ( HCP ), a 42.6% premium to Monday's closing price. HashiCorp's ( HCP ) shares surged on Tuesday following media reports of the deal talks.

IBM ( IBM ), which separately reported first-quarter adjusted profit above Wall Street estimates, has doubled down on its cloud business as it becomes increasingly necessary to store and process the vast amounts of data employed in artificial intelligence programs.

The Big Blue's "AI book of business" crossed $1 billion in the first quarter, growing sequentially. The book comprises actual sales and bookings from various offerings.

The acquisition will be funded by cash on hand and will add to adjusted core profit within the first full year of closing, expected by the end of 2024.

California-based HashiCorp ( HCP ) allows customers to establish and manage their infrastructures on the cloud.

"The deal provides a cloud infrastructure automation growth engine for IBM ( IBM )," Stephen Elliot, a vice president at market research firm International Data Corp, said on Tuesday, following reports of the talks.

The deal is a great complement to IBM's ( IBM ) Red Hat business, Elliot added.

Software revenue grew 5.5% in the first quarter while the consulting segment was flat. Total revenue of $14.46 billion fell just short of LSEG estimates of $14.55 billion.

"You're seeing clients in this uncertain macroeconomic environment. You're seeing clients that are tightening discretionary spending," CFO Jim Kavanaugh told Reuters.

Accenture had cut its fiscal-year 2024 revenue forecast in March as clients curbed spending on its consulting services.

The company reported adjusted earnings of $1.68 per share for the quarter ended March, compared to analysts' average estimate of $1.60.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sriraj Kalluvila)