Core Viewpoint - Confluent's stock is experiencing a significant decline despite reporting strong quarterly results, primarily due to disappointing forward guidance from management [1][2]. Financial Performance - Confluent reported Q1 sales of $271.1 million, exceeding Wall Street's expectations of $264.39 million, and adjusted earnings per share of $0.08, surpassing the estimate of $0.07 [3]. - The company's revenue grew 24.8% year over year, with subscription revenue increasing by 26% to $261 million, and Confluent Cloud revenue rising 34% year over year to $143 million [4]. - Adjusted earnings per share increased by 60% year over year in the quarter [4]. Growth Outlook - For Q2, Confluent expects subscription sales to be between $267 million and $268 million, indicating a growth rate of approximately 19% at the midpoint [5]. - The full-year subscription revenue projection is between $1.1 billion and $1.11 billion, reflecting an annual growth rate of 19.5% at the midpoint [6]. - The company attributes its softer growth outlook to uncertainties regarding spending from large customers, raising concerns among investors about potential macroeconomic headwinds affecting expansion [6].

Company Performance - Confluent reported quarterly earnings of $0.08 per share, exceeding the Zacks Consensus Estimate of $0.07 per share, and up from $0.05 per share a year ago, representing an earnings surprise of 14.29% [1] - The company achieved revenues of $271.12 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.86%, and an increase from $217.24 million year-over-year [2] - Over the last four quarters, Confluent has consistently surpassed consensus EPS and revenue estimates [2] Stock Outlook - Confluent shares have declined approximately 14% since the beginning of the year, compared to a 5.5% decline in the S&P 500 [3] - The company's current Zacks Rank is 3 (Hold), indicating expected performance in line with the market in the near future [6] - The consensus EPS estimate for the upcoming quarter is $0.08 on revenues of $277.28 million, and for the current fiscal year, it is $0.35 on revenues of $1.16 billion [7] Industry Context - The Internet - Software industry, to which Confluent belongs, is currently ranked in the bottom 44% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment [5]

Financial Performance - Confluent reported revenue of $271.1 million for the three months ended March 31, 2025, representing a year-over-year growth of 25% compared to $217.2 million in the same period of 2024[129]. - Total revenue for the three months ended March 31, 2025, reached $271.1 million, up 25% from $217.2 million in the prior year[160]. - Subscription revenue for the three months ended March 31, 2025, was $260.9 million, a 26% increase from $206.9 million in the same period of 2024[160]. - Gross profit for the three months ended March 31, 2025, was $202.0 million, representing a 29% increase from $156.0 million in the same period of 2024[166]. - The net loss for the three months ended March 31, 2025, was $67.6 million, an improvement from a net loss of $93.0 million in the same period of 2024[160]. - The company reported a loss before income taxes of $80.8 million, an improvement of $9.7 million from the previous year's loss of $90.5 million[174]. Customer Growth - The company had approximately 6,140 customers as of March 31, 2025, reflecting a year-over-year growth of 20% from 5,120 customers in 2024[129]. - The number of customers contributing $100,000 or greater in Annual Recurring Revenue (ARR) increased to 1,412 as of March 31, 2025, compared to 1,260 in 2024[141]. - Confluent aims to maintain its product leadership and brand strength to drive revenue growth, with a focus on increasing customer adoption and usage expansion[133]. Revenue Composition - Confluent Cloud revenue accounted for 53% of total revenue for the three months ended March 31, 2025, up from 49% in the same period of 2024[134]. - The dollar-based net retention rate (NRR) was 117% as of March 31, 2025, indicating strong expansion within existing customers[142]. Expenses and Profitability - Total operating expenses for the three months ended March 31, 2025, were $303.2 million, compared to $267.4 million in the prior year[160]. - Research and development expenses increased by $19.2 million to $116.8 million, representing 43% of revenue, compared to 45% in the previous year[169]. - Sales and marketing expenses rose by $14.9 million to $146.3 million, accounting for 54% of revenue, down from 60%[170]. - General and administrative expenses increased by $1.7 million to $40.1 million, making up 15% of revenue, compared to 18% last year[171]. - Subscription gross margin increased to 78% for the three months ended March 31, 2025, compared to 77% in the prior year[166]. Cash Flow and Financial Position - As of March 31, 2025, the company had cash, cash equivalents, and marketable securities totaling $1,916.6 million[178]. - The company generated net cash used in operating activities of $26.8 million for the three months ended March 31, 2025, compared to $26.0 million in the same period last year[180]. - Cash used in investing activities was $112.0 million, primarily due to purchases of marketable securities totaling $405.2 million[185]. - Cash provided by financing activities was $30.8 million, driven by $16.6 million from stock option exercises and $14.2 million from the employee stock purchase plan[188]. - The company has an accumulated deficit of $2,056.8 million as of March 31, 2025, indicating significant operating losses and negative cash flows from operations[179]. Market Conditions - Confluent's business model is impacted by macroeconomic conditions, leading to longer sales cycles and increased scrutiny on IT spending from customers[130]. - The company expects fluctuations in total revenue based on new subscriptions, customer renewals, and consumption trends[147]. - The company expects to continue investing in growth while optimizing for profitability and cash flow amid challenging macroeconomic conditions[138]. - Confluent's consumption-oriented sales model allows for flexibility in customer contracts, which may lead to revenue fluctuations based on usage patterns[128]. Strategic Investments - The company has made significant investments in its Data Streaming Platform, including the acquisition of immerok GmbH to enhance its Apache Flink offerings[133]. - The company is focused on expanding its customer base through self-service cloud adoption and free trials, which has led to increased consumption and adoption of its Data Streaming Platform[129].

Financial Data and Key Metrics Changes - Q1 subscription revenue grew 26% to $261 million, exceeding guidance and representing 96% of total revenue [23] - Confluent Cloud revenue increased 34% to $143 million, accounting for 55% of subscription revenue [23] - Non-GAAP operating margin improved by 6 percentage points to 4% [4][26] - Subscription gross margin increased by 100 basis points to 81.7% [25] - Adjusted free cash flow margin was 1.8%, impacted by a compensation change [26] Business Line Data and Key Metrics Changes - Confluent Platform revenue reached a record $118.2 million, with growth accelerating to 18% [23] - The number of customers increased to approximately 6,140, with a net addition of 340 customers, the highest since Q1 2022 [27] - The count of $1 million plus ARR customers grew to 210, marking the best quarter for net additions in this cohort [28] Market Data and Key Metrics Changes - Revenue from the U.S. grew 23% to $156.4 million, while revenue from outside the U.S. grew 28% to $114.7 million [24] - The gross retention rate remained above 90%, demonstrating the mission-critical nature of the data streaming platform [6][28] Company Strategy and Development Direction - The company focuses on enabling customers to build next-generation applications efficiently, particularly in the age of AI [4] - Confluent aims to capture the $100 billion addressable market opportunity by leveraging Apache Kafka as a foundational technology [6] - The strategy includes a hybrid business model that allows flexibility in deployment across on-prem, cloud, and hybrid environments [12] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in new use case additions among larger customers, while smaller customers showed stable consumption [29] - The company expects subscription revenue for Q2 2025 to be in the range of $267 million to $268 million, representing approximately 19% growth [28] - For fiscal year 2025, subscription revenue is expected to be between $1.1 billion and $1.11 billion, indicating growth of approximately 19% to 20% [29] Other Important Information - The company was named Google Partner of the Year for the sixth time, reflecting strong partnerships with leading cloud service providers [21] - Ryan McBann was promoted to Chief Revenue Officer, tasked with leading global field strategy [20] Q&A Session Summary Question: What is the status of existing use cases and consumption run rates? - Management observed lower consumption in larger customers but stable consumption in smaller ones, indicating a cycle of optimization and growth [35][36] Question: How does the company view the future of Confluent regarding diskless Kafka? - Management confirmed that both cloud and WarpStream are utilizing intelligent storage solutions, optimizing cost and performance [42][44] Question: Can you quantify the growth of DSP offerings like Flink and TableFlow? - DSP offerings are significantly outgrowing the core cloud business, with early traction noted in both cloud and Confluent Platform [48][50] Question: How does the company view customer additions versus net revenue retention (NRR)? - The company expects NRR to remain stable around 17%, supported by a strong gross retention rate [58] Question: What is the outlook for the Confluent Platform (CP) performance? - CP showed strong performance with an 18% growth, driven by multi-year deals and a balanced customer mix [99]

Financial Data and Key Metrics Changes - Q1 subscription revenue grew 26% to $261 million, exceeding guidance and representing 96% of total revenue [25] - Confluent Cloud revenue increased 34% to $143 million, accounting for 55% of subscription revenue [25] - Non-GAAP operating margin improved by 6 percentage points to 4% [6] - Subscription gross margin increased by 100 basis points to 81.7% [27] - Operating margin was 4.3%, exceeding guidance of approximately 3% [28] - Adjusted free cash flow margin was 1.8%, impacted by a non-recurring compensation change [28] Business Line Data and Key Metrics Changes - Confluent Platform revenue reached a record $118.2 million, with growth accelerating to 18% [25] - The company added 340 new customers in Q1, the highest net addition in three years [9] - The number of customers with $1 million plus ARR grew to 210, with a net addition of 16 customers, the best quarter for this cohort [30] Market Data and Key Metrics Changes - Revenue from the U.S. grew 23% to $156.4 million, while revenue from outside the U.S. grew 28% to $114.7 million [26] - The gross retention rate remained above 90%, demonstrating the mission-critical nature of the platform [8] Company Strategy and Development Direction - The company focuses on enabling customers to build next-generation applications efficiently, particularly in the age of AI [6] - Confluent aims to capture the $100 billion plus addressable market opportunity by leveraging Apache Kafka as a foundational technology [8] - The strategy includes a hybrid business model that allows flexibility in deployment across on-prem, cloud, and hybrid environments [14] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in new use case additions among larger customers, while smaller customers showed stable consumption [31] - The company expects subscription revenue for Q2 2025 to be in the range of $267 million to $268 million, representing approximately 19% growth [30] - For fiscal year 2025, subscription revenue is expected to be between $1.1 billion and $1.11 billion, indicating growth of approximately 19% to 20% [31] Other Important Information - The company was named a Google Partner of the Year for the sixth time, reflecting strong partnerships with leading cloud service providers [22] - Ryan McBann was promoted to Chief Revenue Officer, leading global field strategy [21] Q&A Session Summary Question: What is the consumption run rate for existing use cases? - Management observed lower consumption in larger customers but stable consumption in smaller ones, indicating a cycle of optimization and growth [37][39] Question: How is the open-source community responding to diskless Kafka? - Management confirmed that they are exploring diskless solutions and optimizing storage use across their platforms [43][45] Question: Can you quantify the growth of DSP offerings? - DSP offerings are significantly outgrowing the core cloud business, with strong early adoption of Flink and TableFlow [51][52] Question: How do you view the relationship between customer adds and NRR? - The company expects NRR to remain stable around 17%, supported by a strong gross retention rate [60] Question: What is the outlook for AI-related demand? - Management sees strong demand for AI applications, particularly in real-time data processing, which is becoming increasingly important for enterprises [66][68] Question: How is the company positioned for potential optimization activities? - Management believes that customers have already optimized their cloud usage significantly, leading to a tighter range of outcomes compared to previous cycles [82][84]

Financial Performance Highlights - Q1 2025 subscription revenue reached $260.9 million, a 26% year-over-year increase[8] - Q1 2025 cloud revenue was $142.7 million, representing a 34% year-over-year growth[8] - The company achieved a non-GAAP operating margin of 4.3% in Q1 2025, a 6 percentage point increase year-over-year[8] - Adjusted free cash flow margin for Q1 2025 was 1.8%, up 16 percentage points year-over-year[8] - The net retention rate was 117%[8] Customer Growth - Confluent has been driving business success at every stage of the customer journey[29] - The number of customers with at least $100,000 in ARR increased[58] - The number of customers with at least $1 million in ARR reached 210[59] Market Opportunity and Strategy - Confluent estimates a total addressable market (TAM) exceeding $100 billion[44, 69] - The company is focused on managing net dilution, targeting a long-term goal of below 2%[67] - Confluent is positioned for growth with its complete data streaming platform[69]

Exhibit 99.1 Confluent Announces First Quarter 2025 Financial Results MOUNTAIN VIEW, Calif. -- April 30, 2025 -- Confluent, Inc. (NASDAQ: CFLT), the data streaming pioneer, today announced financial results for its first quarter of 2025, ended March 31, 2025. "Confluent started the year with solid momentum, achieving subscription revenue growth of 26% year over year," said Jay Kreps, co-founder and CEO, Confluent. "Our growth at scale amid heightened macroeconomic uncertainty demonstrates the mission-critic ...

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Core Viewpoint - Confluent (CFLT) is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a strong history of exceeding expectations [1]. Earnings Performance - Confluent has a solid track record of surpassing earnings estimates, with an average surprise of 90% over the last two quarters [2]. - In the most recent quarter, Confluent reported earnings of $0.09 per share against an expectation of $0.05, resulting in an 80% surprise. The previous quarter also saw a significant surprise of 100% with actual earnings of $0.10 per share compared to an estimate of $0.05 [3]. Earnings Estimates and Predictions - Recent estimates for Confluent have been revised upward, indicating positive sentiment among analysts. The Zacks Earnings ESP for the company is currently positive, suggesting a strong likelihood of an earnings beat [6]. - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a historical success rate of nearly 70% in beating consensus estimates [7]. - Confluent's current Earnings ESP stands at +3.70%, reflecting increased analyst optimism regarding its earnings prospects. This, combined with a Zacks Rank of 2 (Buy), indicates a strong possibility of another earnings beat [9]. Earnings Release Information - The next earnings report for Confluent is anticipated to be released on April 30, 2025 [9].

Core Viewpoint - Confluent (CFLT) has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The correlation between changes in a company's future earnings potential and its stock price movements is strong, largely due to institutional investors who adjust their valuations based on earnings estimates [3]. - An increase in earnings estimates typically leads to higher fair value for a stock, prompting institutional investors to buy or sell, which in turn affects stock prices [3]. Implications of the Upgrade - The rising earnings estimates and the Zacks rating upgrade for Confluent suggest an improvement in the company's underlying business, which could lead to an increase in stock price as investors respond positively [4]. - The Zacks Rank system effectively utilizes earnings estimate revisions to guide investment decisions, indicating that tracking these revisions can be beneficial [5]. Zacks Rank System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [6]. - The system maintains a balanced distribution of 'buy' and 'sell' ratings across over 4000 stocks, ensuring that only the top 20% receive a 'Strong Buy' or 'Buy' rating [8][9]. Earnings Estimate Revisions for Confluent - For the fiscal year ending December 2025, Confluent is expected to earn $0.35 per share, reflecting a 20.7% increase from the previous year [7]. - Over the past three months, the Zacks Consensus Estimate for Confluent has risen by 2.6%, indicating positive sentiment among analysts [7].