Confluent, Inc. (CFLT): A Bull Case Theory

Core Thesis - Confluent, Inc. is experiencing strong growth driven by subscription revenue and operational efficiency, positioning itself as a leader in AI-driven data infrastructure and streaming analytics [1][5]. Financial Performance - In Q3 2025, Confluent reported revenue of $298.5 million, a 19.3% increase year over year, surpassing estimates [2]. - Subscription revenue reached $286.3 million, accounting for 96% of total revenue, with Confluent Cloud growing 24% to $161 million [2]. - The Confluent Platform grew 14% to $125.4 million, supported by demand from regulated industries and hybrid deployments [3]. - International revenue surged 29% to $126.4 million, now representing 42% of total revenue [3]. - Non-GAAP operating margin improved by 340 basis points to 9.7%, with free cash flow margin at 8.2% and EPS of $0.13 beating expectations by 30% [3]. Customer Growth and Market Position - RPO increased by 43% to $1.26 billion, marking the fourth consecutive quarter of acceleration [3]. - The company has 1,487 clients with over $100K ARR and 234 clients with over $1M ARR, indicating strong large customer momentum [3]. - Flink and WarpStream showed significant growth, with 70% sequential ARR growth and 8× consumption growth, respectively [4]. - Confluent's position as a real-time "data context layer" for AI has led to adoption by over 100 AI-native customers, with AWS and MongoDB contributing 25% of new business [4]. Future Outlook - Management anticipates a minor Q4 headwind from an AI-native client shifting workloads on-prem but maintains a raised full-year guidance with FY25 revenue expected between $1.113 billion and $1.114 billion and 7% operating margins [5]. - The company is focused on healthy pipeline growth, rising profitability, and strategic momentum in AI and streaming analytics, reinforcing its role in the data infrastructure ecosystem [5].