Financial Performance - Confluent's Q2 2025 revenue reached $282.3 million, a 21% year-over-year increase[9,58] - Cloud revenue was $150.5 million, representing a 28% year-over-year growth[9,56] - The company achieved a Non-GAAP operating margin of 6.3%, a 6 percentage point increase year-over-year[9] - Adjusted Free Cash Flow Margin was 3.9%, a 3 percentage point increase year-over-year[9] - Subscription revenue for Q2 2025 was $270.8 million[54,79] Customer Growth and Retention - Net Retention Rate was 114%[9] - The number of customers contributing $100,000 or more in ARR grew by 24% year-over-year[60] - Customers with >= $1M in ARR increased by 10% YoY[60] Market and Strategy - Confluent estimates a total addressable market (TAM) of over $100 billion[46,70] - The company is focused on expanding its Data Streaming Platform (DSP) capabilities[8,21] - Confluent is transitioning to "Act 3," focusing on a complete Data Streaming Platform[8,48] Revenue Mix - In Q2 2025, US revenue accounted for 53% and International revenue accounted for 47% of the total revenue[58] - Confluent Cloud accounted for 50% of the revenue, Confluent Platform accounted for 46% and Services accounted for 4% of the total revenue in Q2 2025[58]

[Confluent Q2 2025 Financial Results Overview](index=1&type=section&id=Confluent%20Announces%20Second%20Quarter%202025%20Financial%20Results) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management reported strong Q2 performance with **28% Confluent Cloud revenue growth** and **tripled Flink ARR**, alongside continued margin expansion - Confluent Cloud revenue grew **28% year-over-year**, leading the company's performance[2](index=2&type=chunk) - Flink Annual Recurring Revenue (ARR) has grown approximately **3x** over the last two quarters, indicating strong adoption of the complete data streaming platform strategy[2](index=2&type=chunk) - The CFO noted solid top-line growth and continued margin expansion for the quarter[2](index=2&type=chunk) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Confluent achieved **$282.3 million in total revenue**, a **20% year-over-year increase**, with significant non-GAAP operating income and EPS improvement Q2 2025 Financial Performance vs. Q2 2024 (In millions, except per share data) | Metric | Q2 2025 | Q2 2024 | Y/Y Change | | :--- | :--- | :--- | :--- | | Total Revenue | $282.3 | $235.0 | 20% | | Subscription Revenue | $270.8 | $224.7 | 21% | | GAAP Operating Loss | $(96.4) | $(108.3) | $11.9 | | Non-GAAP Operating Income | $17.8 | $1.3 | $16.5 | | Non-GAAP Operating Margin | 6.3% | 0.6% | 5.7 pts | | Non-GAAP Net Income Per Diluted Share | $0.09 | $0.06 | $0.03 | | Adjusted Free Cash Flow | $11.0 | $2.7 | $8.3 | - Confluent Cloud revenue, a key growth driver, increased **28% year-over-year** to **$151 million**[5](index=5&type=chunk) - Customers with **$100,000 or greater in ARR** grew **10% year-over-year** to **1,439**[5](index=5&type=chunk) [Financial Outlook](index=1&type=section&id=Financial%20Outlook) Confluent projects Q3 2025 subscription revenue of **$281-$282 million** with a **7% non-GAAP operating margin**, and full-year subscription revenue of **$1.105-$1.11 billion** with a **6% margin** Q3 and FY 2025 Financial Outlook | Metric | Q3 2025 Outlook | FY 2025 Outlook | | :--- | :--- | :--- | | Subscription Revenue | $281-$282 million | $1.105-$1.11 billion | | Non-GAAP Operating Margin | ~7% | ~6% | | Non-GAAP Net Income Per Diluted Share | $0.09-$0.10 | ~$0.36 | [Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets reached **$2.82 billion**, driven by marketable securities, with total stockholders' equity increasing to **$1.06 billion** Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $295,591 | $385,980 | | Marketable securities | $1,645,032 | $1,524,583 | | **Total Assets** | **$2,817,408** | **$2,694,911** | | Deferred revenue (Current) | $424,293 | $378,771 | | **Total Liabilities** | **$1,753,741** | **$1,733,685** | | **Total Stockholders' Equity** | **$1,063,667** | **$961,226** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 total revenue grew to **$282.3 million**, with GAAP operating loss narrowing to **$96.4 million** and net loss per share improving to **$(0.24)** Statement of Operations Summary - Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue | $282,285 | $234,986 | | Gross Profit | $208,115 | $170,005 | | Total Operating Expenses | $304,553 | $278,354 | | Operating Loss | $(96,438) | $(108,349) | | Net Loss | $(81,950) | $(89,900) | | Net Loss Per Share | $(0.24) | $(0.28) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q2 2025 operating cash flow significantly increased to **$18.1 million**, resulting in **$11.0 million** in adjusted free cash flow Cash Flow Summary - Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $18,115 | $8,590 | | Net Cash Used in Investing Activities | $(8,489) | $(46,531) | | Net Cash Provided by Financing Activities | $6,062 | $13,096 | | Net Increase (Decrease) in Cash | $17,030 | $(25,045) | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) [Reconciliation of Operating and Net Income](index=10&type=section&id=Reconciliation%20of%20Operating%20and%20Net%20Income) Q2 2025 GAAP operating loss of **$96.4 million** was adjusted to a non-GAAP operating income of **$17.8 million**, primarily due to **$106.9 million** in stock-based compensation GAAP to Non-GAAP Reconciliation - Q2 2025 (in thousands) | Metric | GAAP | Adjustments* | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Loss/Income | $(96,438) | $114,276 | $17,838 | | Net Loss/Income | $(81,950) | $116,214 | $34,264 | - The largest adjustment to GAAP operating loss was **$106.9 million** in stock-based compensation-related charges[28](index=28&type=chunk) [Reconciliation of Free Cash Flow](index=10&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) Q2 2025 net cash from operating activities of **$18.1 million** resulted in **$11.0 million** of free cash flow, representing a **3.9% margin** Free Cash Flow Reconciliation - Q2 2025 (in thousands) | Metric | Amount | | :--- | :--- | | Net cash provided by operating activities | $18,115 | | Less: Capitalized internal-use software costs | $(6,191) | | Less: Capital expenditures | $(919) | | **Free cash flow** | **$11,005** | [Supplementary Information and Disclosures](index=2&type=section&id=Supplementary%20Information%20and%20Disclosures) [Key Metrics Definitions](index=4&type=section&id=Key%20Metrics%20Definitions) This section defines key performance indicators, including Annual Recurring Revenue (ARR) for Confluent Platform and Cloud, and Flink ARR, a subset for Apache Flink offerings - Annual Recurring Revenue (ARR) for Confluent Cloud and WarpStream customers is annualized based on their actual consumption over the last three months[15](index=15&type=chunk) - Flink ARR is specific to revenue from Confluent Platform and Confluent Cloud for Apache Flink, calculated similarly to total ARR[16](index=16&type=chunk)[17](index=17&type=chunk) [Disclosures](index=2&type=section&id=Disclosures) This section provides standard legal and informational disclosures, including forward-looking statements warnings and explanations for non-GAAP financial measure usage - The company provides a standard forward-looking statements warning, listing numerous risks that could cause actual results to differ[9](index=9&type=chunk)[10](index=10&type=chunk) - Confluent explains its use of non-GAAP financial measures for internal analysis and investor comparability, while also noting their limitations[11](index=11&type=chunk)

Core Insights - Wall Street analysts forecast Confluent (CFLT) to report quarterly earnings of $0.08 per share, reflecting a year-over-year increase of 33.3% [1] - Anticipated revenues are projected to be $277.76 million, showing an 18.2% increase compared to the same quarter last year [1] Earnings Projections - The consensus EPS estimate for the quarter has remained unchanged over the past 30 days, indicating analysts' reassessment of their initial projections [1][2] - Revisions to earnings projections are crucial for predicting investor behavior regarding the stock [2] Revenue Estimates - Analysts project 'Revenue- Services' to reach $10.18 million, indicating a -1.1% change from the prior-year quarter [3] - 'Revenue- Subscription' is expected to be $267.57 million, reflecting a +19.1% change from the year-ago quarter [4] - 'Revenue- Confluent Cloud' is anticipated to reach $149.48 million, showing a +27.8% change from the previous year [4] Remaining Performance Obligations - The consensus for 'Remaining performance obligations (RPO)' is estimated at $1.04 billion, compared to $887.80 million reported in the same quarter last year [5] Stock Performance - Over the past month, Confluent shares have recorded returns of +11.8%, outperforming the Zacks S&P 500 composite's +4.9% change [5] - Based on its Zacks Rank 3 (Hold), CFLT is expected to perform in line with the overall market in the upcoming period [5]

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Confluent (CFLT) due to higher revenues, with a focus on how actual results compare to estimates impacting stock price [1][2] Earnings Expectations - Confluent is expected to report quarterly earnings of $0.08 per share, reflecting a year-over-year increase of +33.3% [3] - Revenue projections stand at $277.76 million, indicating an 18.2% increase from the previous year [3] Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, suggesting stability in analyst expectations [4] - A positive Earnings ESP of +10.20% indicates recent bullish sentiment among analysts regarding Confluent's earnings prospects [12] Earnings Surprise Prediction - The Zacks Earnings ESP model compares the Most Accurate Estimate to the Zacks Consensus Estimate, with a positive reading suggesting a likely earnings beat [8][10] - Stocks with a positive Earnings ESP and a Zacks Rank of 1, 2, or 3 have historically shown a nearly 70% chance of delivering a positive surprise [10] Historical Performance - Confluent has consistently beaten consensus EPS estimates, achieving this in the last four quarters [14] - In the last reported quarter, Confluent exceeded expectations by delivering earnings of $0.08 per share against an anticipated $0.07, resulting in a surprise of +14.29% [13] Conclusion - Confluent is positioned as a strong candidate for an earnings beat, but investors should consider additional factors influencing stock performance [17]

Core Insights - Cathie Wood's Ark Investment Management predicts that AI will drastically reduce software development costs, potentially creating a $13 trillion opportunity by 2030 [2] Company Summaries Confluent - Confluent is positioned as a leader in data streaming technology, essential for real-time data access in software applications, particularly those utilizing AI [5][6] - The company serves over 6,140 business customers and is projected to achieve $1.1 billion in revenue in 2025, marking its first billion-dollar milestone [10] - Confluent's current price-to-sales (P/S) ratio is 7.7, below its three-year average of 10.7, indicating a potential buying opportunity for long-term investors [11] Datadog - Datadog offers a cloud observability platform that monitors digital infrastructure, alerting businesses to issues in real-time, which is crucial for maintaining customer experience [13] - The company had approximately 30,500 business customers by the end of Q1 2025 and is expanding its product offerings to cater to the growing AI market [14] - Datadog expects to generate up to $3.235 billion in revenue for 2025, with a recent forecast increase of $40 million due to strong demand [19]

Group 1: Investment Opportunities in Technology Stocks - The article highlights that not all valuable technology investments are from well-known mega-companies, as smaller firms also present significant growth potential [1][2] - A list of ten tech stocks with impressive growth prospects is provided, emphasizing their unique offerings and market positions [2] Group 2: Specialty Software Solutions - Tyler Technologies specializes in creating tailored software solutions for government and educational institutions, with expected annual growth of around 10% for the next several years [5][6] Group 3: Data Management and Analytics - Snowflake assists organizations in managing and deriving actionable insights from large volumes of digital data, with a growth rate exceeding 20% per year, supported by a booming global data analytics market projected to grow nearly 30% annually through 2034 [7][8] - Confluent offers data streaming solutions to help organizations manage increasing data loads, with anticipated growth of 19% this year and 18% next year [9][10] Group 4: Cybersecurity - Fortinet, a smaller player in the cybersecurity space, provides custom security solutions and is recognized for its unique ASIC security chips, with the cybersecurity market expected to grow at nearly 13% annually through 2034 [12][13] Group 5: Semiconductor Industry - Marvell Technology focuses on specialized AI accelerator chips, projecting over 40% growth this year and nearly 20% next year, despite its smaller market cap of $60 billion [14][15] Group 6: Digital Advertising Solutions - The Trade Desk enhances online marketing effectiveness for companies, reporting nearly $2.5 billion in sales last year, up 26% year over year, with continued growth expected [16][18] Group 7: Cloud Computing - DigitalOcean provides essential cloud solutions, leveraging open-source technology to enhance operational efficiency, with the global cloud computing market projected to grow at an average pace of 22% per year through 2030 [20][22] Group 8: AI in Pharmaceuticals - Recursion Pharmaceuticals utilizes AI to streamline drug testing processes, significantly reducing time and costs associated with clinical trials, with partnerships with major pharmaceutical companies like Roche and Sanofi [23][25] Group 9: E-commerce in Latin America - MercadoLibre, often referred to as the Amazon of Latin America, is positioned to benefit from a rapidly growing e-commerce market, projected to grow 21% this year and double in size between 2023 and 2027 [26][27] Group 10: Quantum Computing - Rigetti Computing, a speculative investment in quantum computing, aims to provide affordable access to quantum platforms, despite reporting only $10.8 million in revenue last year [28][29][30]

Core Insights - The e-signature and "data in motion" markets are both experiencing growth, with Docusign leading in e-signature services and Confluent specializing in real-time data processing [1][2] Company Overview - Docusign serves over 1.4 million customers across 180 countries and has facilitated more than a billion transactions, primarily generating revenue from subscriptions to its e-signature platform and related services [4] - Confluent has 6,140 customers and operates on the Apache Kafka platform, offering additional analytics tools to differentiate itself, with revenue coming from subscriptions and consumption-based fees [5] Growth Comparison - Docusign's revenue grew at a CAGR of 20% from fiscal 2021 to fiscal 2025, with adjusted gross margins increasing from 79% to 82% [7] - Analysts project Docusign's revenue growth will slow to a CAGR of 8% from fiscal 2025 to fiscal 2028 due to market maturation and competitive pressures [8] - Confluent's revenue rose at a CAGR of 42% from 2020 to 2024, with adjusted gross margins expanding from 70% to 79% [10] - Analysts expect Confluent's revenue to grow at a CAGR of 19% from 2024 to 2027, driven by cloud platform growth and AI market expansion [11] Valuation Metrics - Docusign's stock trades at 61 times forward earnings and 5 times this year's sales, while Confluent trades at 7 times this year's sales [12] - Insider trading indicates a more favorable sentiment for Confluent, with insiders buying 17.2 million shares compared to Docusign's 1,300 shares bought [13] Investment Outlook - Docusign's stock has risen due to optimism around its AI-driven IAM platform, but it is valued as a growth stock amid a maturing core business [14] - Confluent is expected to grow at a faster rate and appears more reasonably valued relative to its growth potential [14][15]

Company Overview - Confluent (NASDAQ: CFLT) is a leader in the data streaming industry, enabling enterprises to process and react to data streams in real time [1] - The company's business model is centered around the open-source technologies Apache Kafka and Apache Flink [1] Investment Philosophy - The investment approach emphasizes rigorous analysis and a long-term perspective, focusing on financial health, competitive positioning, and management quality [1] - There is a particular interest in identifying undervalued companies, especially in sectors like Real Estate Investment Trusts (REITs), which are believed to offer significant growth opportunities [1]

Industry Overview - The Internet Software and Services sector is experiencing growth due to increased IT spending on solutions that support hybrid operating environments [1] - The Internet Software industry is ranked in the top 17% of Zacks Industry Rank, indicating an expectation to outperform the market in the next three to six months [2] Company Highlights UiPath Inc. (PATH) - UiPath offers an end-to-end automation platform with a range of robotic process automation solutions [6] - The platform includes AI, ML, and NLP capabilities, enhancing decision-making and information processing [7] - Expected revenue and earnings growth rates for the current year are 8.5% and 3.8%, respectively, with a 1.9% improvement in earnings estimates over the last week [8] Five9 Inc. (FIVN) - Five9 provides intelligent cloud software for contact centers, enabling a wide range of customer service functions [11] - The platform includes AI-driven features such as virtual agents and workflow automation, benefiting from the growing adoption of AI tools [13] - Expected revenue and earnings growth rates for the current year are 9.6% and 11.7%, respectively, with a 5.7% improvement in earnings estimates over the last 60 days [14] Fastly Inc. (FSLY) - Fastly offers infrastructure software for cloud computing, security, and edge computing solutions [15] - The Fastly AI Accelerator was introduced to optimize LLM generative AI applications [15] - Expected revenue and earnings growth rates for 2025 are 8.6% and 25%, respectively, with a 10% improvement in earnings estimates over the last week [17] Calix Inc. (CALX) - Calix provides cloud and software platforms for broadband service providers [18] - The company has integrated AI into its platforms to enhance operations and service delivery [20] - Expected revenue and earnings growth rates for 2025 are 7.1% and 65.4%, respectively, with a 21.1% improvement in earnings estimates over the last 60 days [20] Confluent Inc. (CFLT) - Confluent operates a data streaming platform that allows real-time data streaming for various industries [21][22] - Expected revenue and earnings growth rates for the current year are 19% and 24.1%, respectively, with a 2.9% improvement in earnings estimates over the last 60 days [23]

Core Viewpoint - Confluent has experienced a significant decline in stock value since its IPO, but it may have potential for recovery due to its expanding addressable market and applications in artificial intelligence [2][10][15] Financial Performance - Confluent's stock lost 46% of its value since its IPO and 74% from its all-time high [2] - The company's sales growth rates have decreased from 64% in 2021 to a projected 24% in 2024 [6] - Currently, Confluent is trading at just under 8 times sales, lower than its five-year average of 12 [6] Market Opportunities - Confluent's addressable market is now over $100 billion, double the size from four years ago [10] - The company has seen a 20% year-over-year increase in its customer base in Q1 2025, up from 9% in the previous year [11] Customer Engagement - Confluent's dollar-based net retention rate is 117%, indicating existing customers are increasing their spending [11][12] - The company's non-GAAP operating margin improved by six percentage points year-over-year in Q1, contributing to a 60% increase in non-GAAP earnings to $0.08 per share [12] Future Outlook - Confluent has guided for earnings of $0.36 per share in 2025, suggesting a 24% increase from the previous year [13] - Analysts expect an acceleration in Confluent's bottom-line growth over the next few years, indicating potential stock price appreciation [15]