PresentationKasthuri RanganHead of Software Coverage Excellent. Jay and Rohan, welcome to day 1 of Communacopia and Technology Conference 2025. It's your fourth year in a row in September, I think. So delighted to have you guys here and delighted to have our clients, John, join us from literally all parts of the world. We've had clients from Europe, Asia, U.S., and I'm missing many other countries. My apologies for that. So it is going to be an exciting action packed, information packed, insight packed. AI ...

Summary of Confluent Conference Call Company Overview - **Company**: Confluent (NasdaqGS:CFLT) - **Event**: 2025 Communication and Technology Conference - **Date**: September 08, 2025 Key Points Industry Context - The conference highlighted the role of AI in enhancing software capabilities, suggesting that AI will not replace software but will enable it to flourish [2][3] Company Vision and Growth - Confluent's vision remains focused on connecting organizational data to enable real-time decision-making, with significant growth in their cloud offerings, now representing over 50% of the business [3][4] - The adoption of open-source Kafka continues to grow, with a managed service around Apache Flink also experiencing rapid growth [3][11] AI Integration - AI is seen as a significant catalyst for change, allowing companies to combine their data with off-the-shelf models to make timely decisions [4][6] - Confluent is positioned to enhance AI use cases by providing real-time data processing capabilities, which are essential for effective AI applications [6][7] - The company has observed a 10x increase in production use cases among its largest customers, indicating a shift from experimentation to practical application of AI [19][21] Financial Performance - Subscription revenue growth rate was reported at 21% in Q2, with expectations for continued growth despite some consumption headwinds [13][17] - Confluent Cloud now accounts for 56% of subscription revenue, with a long-term expectation for cloud growth to outpace platform growth [33][36] Customer Engagement and Use Cases - Confluent is seeing successful use cases across various industries, including tech, insurance, and healthcare, focusing on core business processes like claims processing and customer support [23][24][25] - The company emphasizes the importance of scaling these use cases to drive overall business growth [24] Go-to-Market Strategy - Recent field sales reorganization aims to enhance efficiency and drive consumption by ensuring technical resources are effectively assigned to accounts [26][27] - The focus is on transitioning from a single product offering to a comprehensive Data Streaming Platform, which includes multiple products operating in large markets [34][35] Competitive Landscape - Confluent positions itself as a complementary technology to Databricks, emphasizing its strength in streaming data capabilities, which enhances the overall data ecosystem [49][50] - The company aims to provide a better experience through managed solutions, which are increasingly preferred by customers over self-managed platforms [37][39] Future Outlook - Confluent anticipates a continued shift towards managed solutions as companies seek to streamline their data operations and leverage real-time data for decision-making [39][40] - The company is focused on expanding its product offerings and enhancing its market position by integrating AI and modernizing data architecture [35][36][44] Additional Insights - The integration of streaming data with historical data is crucial for enterprises to effectively implement AI solutions [22] - Confluent's growth strategy includes leveraging its partner ecosystem to amplify its market presence and drive adoption of its Data Streaming Platform [35][36]

Core Insights - The article emphasizes the transformative potential of AGI (Artificial General Intelligence) over the next 20 years, likening its impact to that of the internet on society [2] - It discusses the current state of AI development, indicating that many companies are still in the preparatory phase, focusing on data readiness and organizational transformation [3][4] Group 1: AI Development and Company Insights - A subset of startups, often founded by former Palantir employees, is achieving profitability without heavy financing, highlighting a different approach to AI development [3] - Distyl.ai exemplifies the complexity of AI integration into business processes, requiring a systemic overhaul rather than mere tool replacement [4][5] - The article identifies three key dimensions for data preparation: Data Infrastructure, Knowledge Distillation, and Simulation, which are essential for effective AI deployment [5][6] Group 2: Market Performance and Trends - AGIX has shown strong performance, with a weekly increase of 1.99%, outperforming major indices like S&P 500 and QQQ [11][15] - The technology sector experienced net selling, with a notable focus on industrial and communication services, while AI-related stocks like Snowflake and MongoDB saw significant gains [12][14] - The article notes that the current investment environment is favoring companies that can effectively leverage AI capabilities, indicating a shift in market dynamics [15][16] Group 3: AI Infrastructure and Future Directions - Real-time data processing is becoming crucial, with companies like Confluent enhancing their offerings to support AI agents in monitoring and decision-making [7][8] - The integration of AI into enterprise systems requires a robust data governance framework, as highlighted by the collaboration between Snowflake and Confluent [8][9] - The article stresses the importance of decision transparency and traceability in AI applications, which are critical for enterprise-level adoption [9][10]

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Confluent, Inc. and its officers or directors, following a significant drop in the company's stock price after disappointing financial results [1][3]. Financial Performance - On July 30, 2025, Confluent reported its second-quarter financial results, indicating that consumption growth was negatively affected by ongoing optimization efforts, with month-over-month trends lagging behind previous years [3]. - The company's Chief Financial Officer noted that an AI-native customer shifted towards self-management of internal data platforms, leading to a reduction in Confluent Cloud usage [3]. - Following the earnings announcement, Confluent's stock price decreased by $8.68 per share, representing a decline of 32.86%, closing at $17.73 per share on July 31, 2025 [3].

Group 1 - Some investors may find it challenging to understand the operations of certain technology companies, which could deter them from investing [1] - The author has a background in engineering and a strong interest in technology stocks, indicating a trend among investors with technical expertise gravitating towards tech investments [1] Group 2 - The article does not provide specific investment recommendations or advice, emphasizing that past performance does not guarantee future results [2] - It highlights that the views expressed may not represent the opinions of the entire platform, indicating a diversity of perspectives among analysts [2]

Core Insights - The article discusses potential investment opportunities in CFLT, indicating a possible long position in the stock within the next 72 hours [1]. Group 1 - The analyst has no current stock or derivative positions in the companies mentioned but may initiate a beneficial long position in CFLT [1]. - The article expresses the author's own opinions and is not influenced by compensation from any company [1]. - There is no business relationship with any company whose stock is mentioned in the article [1].

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Confluent, Inc. regarding possible violations of federal securities laws and unlawful business practices affecting stockholders [1][2]. Investigation Details - The investigation is focused on whether Confluent has engaged in practices that may have harmed investors, particularly in light of recent financial disclosures [2]. - Investors who have suffered losses and are interested in discussing their legal rights are encouraged to contact the law firm [3]. Company Financial Performance - On July 30, 2025, Confluent announced its second-quarter financial results, revealing that consumption growth was negatively impacted by ongoing optimization efforts and a shift by an AI-native customer towards self-management of data platforms [6]. - Following this announcement, Confluent's stock price dropped by $8.68 per share, or 32.86%, closing at $17.73 per share on July 31, 2025 [6].

Core Viewpoint - Confluent, Inc. is under investigation for potential violations of federal securities laws following a significant drop in stock price after the release of its Q2 2025 financial results, which indicated a reduction in revenue growth due to a major client's shift towards self-management of data platforms [1][2]. Financial Performance - On July 30, 2025, Confluent reported its Q2 2025 financial results, highlighting that an AI-native customer is reducing its usage of Confluent Cloud, which is expected to dampen Q4 cloud revenue growth by low single digits [2]. - Following this announcement, Confluent's stock price fell by $8.67, or 32.8%, closing at $17.73 per share on July 31, 2025, resulting in financial losses for investors [2].

Core Viewpoint - The Schall Law Firm is investigating Confluent, Inc. for potential violations of securities laws related to misleading statements and undisclosed information impacting investors [1][2]. Group 1: Investigation Details - The investigation centers on whether Confluent issued false or misleading statements and failed to disclose relevant information to investors [2]. - Confluent's Q2 2025 financial results, announced on July 30, 2025, indicated that consumption growth was affected by ongoing optimization, with month-over-month trends lagging behind previous years [2]. - A significant factor in the decline of Confluent's stock was the announcement that an AI-native customer was shifting towards self-management of internal data platforms, leading to reduced usage of Confluent Cloud services [2]. Group 2: Market Reaction - Following the earnings call and the related announcements, shares of Confluent experienced a sharp decline, falling by more than 32.8% the day after the news was released [2].

Core Viewpoint - Confluent's stock has experienced a significant decline due to slowing growth, but there are potential long-term recovery opportunities, particularly with the rise of AI applications [1][2]. Financial Performance - Confluent reported a 20% year-over-year revenue increase to over $282 million and a 50% increase in earnings per share to $0.09 [4]. - The company has slightly increased the lower end of its 2025 revenue guidance, indicating a positive outlook despite current challenges [6]. Growth Challenges - Growth has been hindered by customer optimization initiatives, leading to a forecast of slower sales growth in the second half of the year [5]. - The remaining performance obligations (RPO) increased by 31%, indicating a growing backlog of unfulfilled contracts, which could support future revenue growth [7]. AI Adoption Potential - Confluent anticipates a significant boost from AI service adoption, expecting production AI use cases to grow 10 times across several hundred customers by 2025 [9]. - The company is seeing increased usage of its platform for real-time AI workloads, which could attract more customers [8]. Valuation and Investment Opportunity - Confluent's stock is currently trading at an attractive valuation of 5 times sales, significantly lower than its five-year average and the U.S. technology sector average of 8.4 times [12]. - Analysts expect mid-teens revenue growth over the next couple of years, with potential for outperformance due to improving revenue backlog [13]. - If revenue reaches $1.57 billion by 2027 and trades at 7 times sales, the market cap could increase by 86% to $11 billion [15].