Jackson Peak Capital, an investment management firm, released its fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. Jackson Peak Capital employs a concentrated long/short equity approach aimed at generating strong absolute returns across various market conditions. The firm aims to deliver returns similar to equities while reducing market risk and maintaining minimal correlation with the broader equity markets. However, its monthly and quarterly performance do not follow benc ...

Core Insights - Confluent, Inc. is a key player in the data streaming industry, focusing on real-time data processing and analytics, essential for businesses utilizing big data and AI [1] Financial Performance - On February 11, 2026, Confluent reported an earnings per share (EPS) of -$0.23, missing the expected EPS of $0.10 [2][6] - The company achieved a revenue of $314.8 million, exceeding the estimated $308 million, with a 23% year-over-year increase in Confluent Cloud [2] Valuation Metrics - Confluent's price-to-earnings (P/E) ratio is -36.36, indicating negative earnings, while the price-to-sales ratio is 9.28, suggesting investor confidence in revenue potential [3] - The enterprise value to sales ratio stands at 9.93, and the enterprise value to operating cash flow ratio is high at 180.26, indicating low operating cash flow relative to valuation [4] Financial Health - The company's debt-to-equity ratio is 0.95, reflecting a moderate level of debt compared to equity [5] - A current ratio of 3.83 indicates a strong ability to meet short-term liabilities, suggesting stable financial health despite negative earnings [5][6]

Core Thesis - Confluent, Inc. is experiencing strong growth in its data streaming platform, with a bullish outlook supported by recent financial performance and market positioning [1][8] Financial Performance - As of January 28th, Confluent's share price was $30.53, with a forward P/E ratio of 62.50 [1] - In Q3 2025, Confluent reported subscription revenue of $286 million, a 19% increase year-over-year, exceeding consensus estimates by 2% [3] - Confluent Cloud revenue grew 24% year-over-year to $161 million, also beating expectations by 2% [3] - Operating margins reached 9.7%, significantly above the 7.1% consensus, reflecting effective sales and marketing strategies [4] - Management raised guidance for Q4 2025, projecting total revenue of $296 million (up 18% year-over-year) and Confluent Cloud revenue of $165 million (up 20%) [4] Competitive Positioning - Confluent maintains a strong competitive position, achieving deal win rates above 90% against cloud service provider offerings, with average deal sizes doubling over the past two quarters [5] - Usage across multi-tenant Freight clusters, Enterprise clusters, and WarpStream has quadrupled over the last three quarters, indicating robust demand [5] Partner Ecosystem - The partner ecosystem contributed 25% of new business in Q3 2025, with key partners including Databricks, Microsoft, Google Cloud, AWS, and MongoDB [6] - The improving fundamentals and strong growth in cloud consumption position Confluent for continued momentum in revenue growth and margin expansion [6]

Core Viewpoint - Confluent, Inc. is currently a prominent AI stock on Wall Street, with IBM announcing its acquisition for $11 billion, paying $31 per share for all outstanding common shares [1][2]. Group 1: Acquisition Details - IBM's acquisition of Confluent is valued at $11 billion, with a cash offer of $31 per share for all issued and outstanding common shares [1]. - Bernstein has reiterated an "Outperform" rating on Confluent with a price target of $31.00 following the acquisition announcement [1]. Group 2: Market Position and Technology - Confluent has been a long-standing acquisition target due to its relatively low multiple and strong market position [2]. - The company's technology, particularly its open-source middleware technology like Kafka and Flink, has gained further attention after OpenAI committed to using it for its next-generation model infrastructure [3]. - Confluent's technology is crucial for generative AI, which is more effectively delivered through Cloud Native technology, reinforcing its relevance in the tech landscape [4]. Group 3: Correlation with Major Platforms - Confluent enjoys a strong correlation with AWS, enhancing its position within the technology sector [4].

Market Overview - Wall Street experienced a relatively quiet trading day with modest declines in major indices: Dow Jones down 0.45%, S&P 500 down 0.35%, and Nasdaq down 0.14% [2][3] Top Stock Gainers - Confluent (CFLT) saw a significant increase of 29.08% following IBM's announcement to acquire the company for $31 per share, valuing it at $11 billion [5][6] - Wave Life Sciences (WVE) surged by 146.13% after reporting positive trial results for its obesity treatment WVE-007, which showed improvements in body composition and a favorable safety profile [7] Top Stock Losers - Unilever (UL) shares fell by 7.11% due to the spinoff of its Magnum Ice Cream unit, which began trading independently, affecting the eligibility of new Unilever shareholders for Magnum shares [8][9] - Air Products and Chemicals (APD) dropped over 9% amid concerns regarding a potential partnership with Yara International, with investors worried about the capital requirements impacting the company's balance sheet [9]

Core Viewpoint - IBM is acquiring Confluent for $11 billion in cash, valuing each share at a premium of $31, which has led to a nearly 30% increase in Confluent's stock price [1][2] Group 1: Acquisition Details - IBM's acquisition aims to enhance its capabilities in real-time data streaming and processing, which is crucial for scaling its AI models [2] - The deal is expected to close in the first half of 2026, after which Confluent will become a private company [5] Group 2: Market Reaction - Despite the surge in stock price, Confluent shares are still down over 20% from their year-to-date high in early February [1] - The market has largely priced in the acquisition premium, leaving little upside for new investors [4] Group 3: Analyst Insights - Wedbush Securities' analyst Dan Ives views the acquisition as a strategic move to accelerate IBM's AI strategy [2] - The consensus target price for Confluent shares was nearly $28 prior to the acquisition announcement, indicating that the market did not expect shares to trade above the current price [6][7]

Core Viewpoint - IBM is acquiring Confluent for $31 per share in cash, which is expected to enhance IBM's capabilities in artificial intelligence and data management [3][4]. Group 1: Acquisition Details - IBM announced a definitive agreement to acquire all outstanding stock of Confluent for $31 cash per share [3]. - Confluent specializes in preparing data for AI, which will provide IBM with a smart data platform tailored for enterprise IT [3]. - Confluent's total addressable market has doubled in the last four years, reaching approximately $100 billion [3]. Group 2: Financial Implications - The acquisition price represents a premium of about 6.7 times Confluent's trailing sales, compared to IBM's own price-to-sales ratio of 4.5x [6]. - Analysts project IBM's earnings growth at 7% over the next five years, while Confluent is expected to grow at 24% [7]. - Confluent's current revenue of $1.1 billion is relatively small compared to IBM's total revenue of $65.4 billion, raising concerns about its impact on IBM's stock valuation [8].

Market Overview - The S&P 500 was approximately 0.3% below its all-time high set in October, while the Nasdaq Composite increased by 0.3% [4][6] - Trading across the broader market remained subdued, with most stocks lower [4][6] Company News - Warner Bros Discovery shares surged by 7.8% after Paramount made a direct bid to acquire the media group, offering $30 in cash per share [4][6] - Paramount's bid aims to displace Netflix's cash-and-stock offer for Warner Bros Discovery, which is under regulatory scrutiny [4][6] - Confluent's stock jumped by 28.7% following IBM's announcement of an $11 billion acquisition to enhance its artificial intelligence capabilities [4][6] - Carvana's shares rose by 6.9% after it was announced that the company would join the S&P 500 index on December 22 [5][6] - CRH and Comfort Systems USA also saw stock increases of 5.3% and 0.8%, respectively, as they were named new entrants to the S&P 500 index [5][6] Economic Indicators - Markets are anticipating a third interest rate cut from the Federal Reserve, with a decision expected on Wednesday [5][6] - Inflation remains above the Federal Reserve's 2% target, leading to divided opinions among policymakers regarding economic risks [5][6] - US Treasury yields were steady, with the 10-year yield at 4.14% [5][6] International Markets - Overseas stock markets showed mixed results, with Hong Kong's index declining by 1.2% and South Korea's benchmark rising by 1.3% [5][6]

Core Insights - IBM announced the acquisition of data streaming firm Confluent for $11 billion, indicating a significant move to enhance its AI capabilities [1] Company Strategy - The acquisition aims to leverage Confluent's data streaming platform to bolster IBM's generative and agentic AI businesses [1]

Company Acquisition - IBM is in advanced negotiations to acquire Confluent, a real-time data infrastructure company, in a deal valued at approximately $11 billion [2][3] - The acquisition aims to enhance IBM's capabilities in hybrid cloud and AI by integrating Confluent's data streaming technology into its analytics and enterprise cloud services, positioning IBM more competitively against AWS, Azure, and Google Cloud [3] Market Position and Strategy - Confluent has a market capitalization exceeding $8 billion and serves customers in finance, retail, and other data-intensive sectors [4] - This potential acquisition follows IBM's recent purchase of HashiCorp, indicating a trend of consolidation in AI-driven enterprise software and cloud infrastructure [4] Pharmaceutical Developments - Eli Lilly, Pfizer, and Johnson & Johnson have been included in China's first innovative drug catalog for private insurance, which aims to improve access to high-cost therapies [4][5] - The catalog features 19 medicines targeting conditions such as cancer, Alzheimer's, and rare genetic disorders, with Eli Lilly's diabetes drug Mounjaro set to be added to China's state-run health insurance scheme starting January 1 [5][6] - The new program allows for negotiated discounts of 15% to 50% on drugs that are too expensive for state insurance, potentially increasing pharmaceutical margins in China's aging market [6]