Straker signs NZD $28 million IBM deal to expand AI translation
Straker has renewed and expanded its partnership with International Business Machines Corporation (IBM) under a three-year agreement valued at approximately NZD $28 million, which may be extended for a further year.
The contract will take effect from 1 January 2026 through 31 December 2028, covering anticipated usage volumes across IBM's global operations. Under the agreement, Straker will continue to provide its AI-powered translation services, with revenue generated through usage-based billing. Currently, more than 10,000 IBM employees utilise Straker's AI-driven Slack translation app.
AI development focus
Beyond translation, this partnership now includes joint development of Small Language Models (SLMs) on the IBM Cloud. These models, co-developed using IBM's watsonx AI technology and Straker's Tiri platform, are intended for specific industries and language pairs. They are designed to deliver improved accuracy, processing speeds, and lower computational requirements compared to general-purpose AI systems. According to testing, these SLMs have outperformed industry benchmarks.
"IBM has been a cornerstone customer for Straker since 2021. Its decision to again extend our relationship and broaden the scope of the partnership provides both validation of our strategy and a strong foundation for future growth. Together we are not only transforming translation services with AI-powered solutions but also opening the door to broader enterprise AI opportunities."
Grant Straker, Co-founder and Chief Executive, said the renewed collaboration with IBM supports Straker's five-year vision, which aims to unify all company platforms into a single AI-driven ecosystem that encompasses translation, verification, and workflow automation.
Commercial model evolution
A prominent aspect of the new agreement is the move to AI token billing, linking revenue more closely to AI use. Straker views this as an opportunity to achieve higher-margin, recurring revenue. The partnership will be managed mainly through IBM Japan, solidifying Straker's integration within IBM's broader innovation network.
Straker expects to benefit from IBM's increased focus on generative AI and cloud solutions, and is now considered a significant technology partner in what is described as one of the world's most established AI ecosystems.
Enterprise momentum
Straker's contract extension with IBM comes as part of a wider strategic shift. The company is transitioning from offering legacy language services to delivering high-value, AI-driven SaaS. In September, Straker secured a USD $2.8 million (NZD $4.9 million) two-year contract with a major global client for translation into 35 languages, delivered through the Verify platform.
The Verify platform integrates AI automation with human quality checks, aiming to provide both speed and accuracy for sectors with strong regulatory requirements such as finance, healthcare, and law. This platform forms part of the company's approach towards enterprise-grade solutions that can be integrated directly into client workflows via partnerships with Slack, n8n, and IBM Cloud, with Microsoft Teams functionality under development.
Financial results and analyst perspective
For the last financial year, Straker reported record adjusted EBITDA of NZD $4.8 million and a gross margin of 67 per cent. These gains followed stricter cost control, a 15 per cent staff reduction, and a greater shift towards software as a revenue source.
Despite volatility in the translation technology sector due to new AI entrants, analysts have cited Straker's ability to remain cash-flow and EBITDA positive. Broker Ord Minnett has reaffirmed a Hold rating on Straker, noting the company's repositioning and its IBM partnership as key elements.
Ord Minnett expects further improvements in operating margins as Straker expands its AI offerings and shifts to AI token billing and specialised SLMs over the coming three years.
Global footprint
Straker, which is based in both New Zealand and Spain, currently serves more than 250 enterprise clients across 20 countries. As the only pure-play AI translation entity on the ASX, Straker aims to position itself as a proxy in public markets for the expanding language-technology sector, estimated to be worth over USD $40 billion worldwide.
The company's strategy involves blending proprietary AI technologies with human linguistic expertise to enable effective cross-language communication and compliance for international organisations. Its range of integrations and enterprise partnerships point to a shift towards unified, automated systems that bring together translation, compliance, and generative AI.
