⚠ The Clouds Sell Their Own PlatformsModerate threat

IBM (IBM) — threat to the moat

Red Hat's neutral platform competes with the cloud owners' own products, and they control the storefront.

Red Hat's growth depends on the willingness of customers to pay for a platform that the large clouds would rather they did not need. IBM names Alphabet, Amazon and Microsoft among its software competitors1, and each sells software that overlaps with Red Hat's to the same buyers.

Growth, 2025 (%)over 30%OpenShift ARR12.9%Hybrid Cloud revenue10.6%Software segmentIBM 2025 Annual Report
Portability is still winning.

The data so far favour Red Hat. OpenShift's recurring revenue grew more than 30% in 20252, and Red Hat as a whole grew faster than the Software segment3. Customers with applications spread across several clouds and their own data centres value one platform over three.

The risk is concentration of buying power. The clouds control what their customers see first, how services are priced together, and how easy it is to run someone else's software. If a cloud chooses to discount its own platform heavily, Red Hat's portability becomes a harder sale.

IBM's 2024 report described a new product aimed at this competition: in the fourth quarter of that year it launched "OpenShift Virtualization Engine to meet growing virtualization demand"4. Virtual machines are a market where the clouds and other software vendors compete hard. Winning there would give OpenShift a second reason to exist beyond containers, and extend Red Hat into workloads that customers have run elsewhere for years.

The rivals are large and the switching costs run in both directions, which keeps the risk in the middle. The threat would be high if OpenShift ARR growth fell below 20% while the clouds' own container services kept growing, since that would say portability had stopped winning new customers.

References
  1. ReportedIBM names Alphabet, Amazon and Microsoft among its software competitors, and each sells software that overlaps with Red Hat's to the same buyers.
    IBM Form 10-K for 2025 - Item 1 business, competitors and strategic partners, Item 1A risk factors, executive officers. — FY2025 · publ. 24 February 2026 · source ↗
  2. ReportedOpenShift's recurring revenue grew more than 30% in 2025, and Red Hat as a whole grew faster than the Software segment.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  3. ReportedOpenShift's recurring revenue grew more than 30% in 2025, and Red Hat as a whole grew faster than the Software segment.
    IBM 2025 Annual Report (Form 10-K exhibit) - management discussion, consolidated financial statements and notes - management discussion of the Software segment: Hybrid Cloud, Automation, Data, Transaction Processing and ARR. — FY2025 · publ. 24 February 2026 · source ↗
  4. ReportedIBM's 2024 report described a new product aimed at this competition: in the fourth quarter of that year it launched "OpenShift Virtualization Engine to meet growing virtualization demand".
    IBM fourth-quarter 2024 prepared remarks, Form 8-K exhibit 99.1 - generative AI book of business, OpenShift ARR and software ARR on the earlier definition. — Q4 2024 · publ. January 2025 · source ↗
Sources
Generated September 28, 2026