We present an atomistic description of the electronic and optical properties of In0.25Ga0.75N/GaN quantum wells. Our analysis accounts for fluctuations of well width, local alloy composition, strain and built-in field fluctuations as well as Coulomb effects. We find a strong hole and much weaker electron wave function localization in InGaN random alloy quantum wells. The presented calculations show that while the electron states are mainly localized by well-width fluctuations, the holes states are already localized by random alloy fluctuations. These localization effects affect significantly the quantum well optical properties, leading to strong inhomogeneous broadening of the lowest interband transition energy. Our results are compared with experimental literature data.