We came across a bullish thesis on Confluent, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on CFLT. Confluent, Inc.'s share was trading at $21.87 as of December 1st. CFLT’s forward P/E was 45.45 according to Yahoo Finance. Photo by Luke Chesser on Unsplash Confluent (CFLT) delivered a strong Q3 2025 performance with $298.5 million in revenue, up 19.3% year over year and ahead of estimates, driven by robust subscription growth and operational ...

Streaming Industry Overview - Streaming stocks are shares of publicly traded companies primarily delivering audio, video, or live content over the internet, with notable examples including Netflix and Spotify [2] - Investors focus on metrics such as subscriber growth, engagement, churn, content, and marketing spend, as these factors drive recurring revenue and influence valuations and volatility [2] Company Summaries Spotify Technology (SPOT) - Spotify Technology S.A. provides audio streaming subscription services globally, operating through two segments: Premium and Ad-Supported [3] - The Premium segment offers unlimited online and offline streaming access to its music and podcast catalog without commercial breaks [3] Confluent (CFLT) - Confluent, Inc. operates a data streaming platform both in the U.S. and internationally, providing platforms for customers to connect applications, systems, and data layers [3] - Key offerings include Confluent Cloud, a managed cloud-native software-as-a-service, and Confluent Platform, an enterprise-grade self-managed software [3] Roku (ROKU) - Roku, Inc. operates a TV streaming platform in the U.S. and internationally, divided into two segments: Platform and Devices [4] - The Platform segment includes digital advertising services, media and entertainment promotional spending, and revenue shares from streaming services [4] Franco-Nevada (FNV) - Franco-Nevada Corporation is a gold-focused royalty and streaming company operating in various regions including South America, Central America, and the U.S. [5] - The company manages a portfolio focused on precious metals and engages in the sale of crude oil, natural gas, and natural gas liquids [5] Logitech International (LOGI) - Logitech International S.A. designs, manufactures, and markets software-enabled hardware solutions for gaming, streaming, and other applications [6] - Product offerings include gaming peripherals, streaming services, and various types of speakers and webcams [6][7]

Core Insights - Confluent, Inc. is a key player in the data streaming industry, known for its Confluent Cloud platform which has experienced significant growth [1] - Barclays analyst Raimo Lenschow has set a price target of $27 for Confluent, indicating a potential upside of 22.28% from its current trading price of $22.08 [2][6] Financial Performance - In Q3 2025, Confluent reported earnings per share (EPS) of $0.13, exceeding the Zacks Consensus Estimate of $0.10, representing a 30% earnings surprise and an improvement from $0.10 EPS in the same quarter last year [3][6] - The company achieved revenues of $298.52 million for the quarter ending September 2025, surpassing the Zacks Consensus Estimate by 2.22% and showing a significant increase from $250.2 million in the same period last year [4][6] Growth Metrics - Confluent Cloud revenue increased by 24% year-over-year, while remaining performance obligations grew by 43% year-over-year, indicating strong customer engagement and consumption growth [5] - Despite a recent stock price decrease of 3.16%, Confluent's market capitalization remains robust at approximately $7.61 billion, reflecting investor confidence in its long-term potential [5]

Core Insights - Confluent Inc reported better-than-expected earnings for Q3, with earnings of 13 cents per share, surpassing the analyst consensus estimate of 10 cents per share [1] - The company achieved quarterly sales of $298.537 million, exceeding the analyst consensus estimate of $292.871 million [1] - Confluent raised its FY2025 adjusted EPS guidance from $0.36 to a range of $0.39-$0.40 [1] Financial Performance - Confluent experienced a 24% year-over-year growth in Confluent Cloud revenue [2] - There was a 43% year-over-year growth acceleration in remaining performance obligations, indicating strong consumption growth and customer commitment [2] Market Reaction - Following the earnings announcement, Confluent shares increased by 11% to $24.51 in pre-market trading [2] Analyst Ratings and Price Targets - Morgan Stanley maintained an Equal-Weight rating and raised the price target from $25 to $27 [5] - Piper Sandler maintained an Overweight rating and increased the price target from $27 to $28 [5] - Baird maintained a Neutral rating and raised the price target from $20 to $26 [5] - Stephens & Co. maintained an Overweight rating and boosted the price target from $25 to $29 [5] - Barclays maintained an Overweight rating and increased the price target from $24 to $27 [5]

Core Insights - Confluent reported revenue of $298.52 million for the quarter ended September 2025, reflecting a year-over-year increase of 19.3% and surpassing the Zacks Consensus Estimate of $292.05 million by 2.22% [1] - The company's EPS for the quarter was $0.13, an increase from $0.10 in the same quarter last year, resulting in an EPS surprise of 30% compared to the consensus estimate of $0.10 [1] Revenue Breakdown - Revenue from Services was $12.19 million, exceeding the average estimate of $10.4 million by analysts, representing a year-over-year increase of 17.8% [4] - Subscription revenue reached $286.34 million, surpassing the average estimate of $281.42 million, with a year-over-year growth of 19.4% [4] - Revenue from Confluent Cloud was $161 million, exceeding the estimated $157.67 million, marking a significant year-over-year increase of 24.1% [4] Stock Performance - Confluent's shares have returned 15.2% over the past month, outperforming the Zacks S&P 500 composite, which saw a change of 2.5% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Q3 subscription revenue grew 19% to $286.3 million, with Confluent Cloud revenue increasing 24% to $161 million, representing 56% of subscription revenue compared to 54% in the previous year [21][24] - Non-GAAP operating margin expanded 3 percentage points to approximately 10%, with subscription gross margin at 81.8% [4][22] - Adjusted free cash flow margin increased 450 basis points to 8.2%, and net income per share was $0.13 [22] Business Line Data and Key Metrics Changes - Confluent Platform revenue grew 14% to $125.4 million, driven by demand in financial services [21] - Flink ARR for Confluent Cloud grew more than 70% sequentially, with over 1,000 customers using Flink [27][28] - The count of $100K+ ARR customers increased to 1,487, marking the largest sequential increase in two years [23] Market Data and Key Metrics Changes - Revenue from the U.S. grew 13% to $172.1 million, while revenue from outside the U.S. grew 29% to $126.4 million [22] - The net retention rate stabilized at 114%, with gross retention rate remaining close to 90% [23] Company Strategy and Development Direction - The company is focused on tightening field alignment to drive more use cases into production and expanding its Data Streaming Platform (DSP) specialist team for multi-product selling [5][6] - The partner ecosystem sourced over 25% of new business in the last 12 months, indicating strong growth potential [9][29] - The company aims to position its Data Streaming Platform as the context layer for enterprise AI, enhancing real-time data capabilities [19][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong cloud consumption growth and the traction of the Data Streaming Platform, particularly with Flink [19][30] - The outlook for Q4 2025 includes expected subscription revenue in the range of $295.5 million to $296.5 million, representing growth of approximately 18% [24] - For fiscal year 2025, subscription revenue is expected to be in the range of $1.1135 billion to $1.1145 billion, representing growth of approximately 21% [25] Other Important Information - The company reported a record operating margin of 9.7%, exceeding guidance by 270 basis points [22] - The WarpStream acquisition has seen 8x growth in consumption over the past year, indicating successful integration and market demand [12][30] Q&A Session Summary Question: Insights on go-to-market changes and pipeline conversion trends - Management highlighted the successful implementation of a specialization model for DSP and the importance of field execution in driving consumption pipeline [33] Question: RPO as a leading indicator for growth - RPO is considered a key leading indicator for Confluent Platform, while for Confluent Cloud, the focus is on the momentum of new use cases moving into production [37] Question: Growth stabilization and cannibalization effects - Management noted that new offerings have proven to be a substantial tailwind, leading to larger deal sizes and increased customer engagement [43] Question: Flink's growth and future potential - The company expressed excitement about Flink's growth trajectory and its potential to capture a significant market opportunity in real-time data processing [57] Question: Impact of U.S. Federal shutdown on guidance - Management indicated that the federal performance in Q3 was in line with expectations, and the impact of the shutdown is accounted for in Q4 guidance [80]

Financial Data and Key Metrics Changes - Q3 subscription revenue grew 19% to $286 million, representing 96% of total revenue [24][4] - Confluent Cloud revenue increased 24% to $161 million, accounting for 56% of subscription revenue compared to 54% in the previous year [24][4] - Non-GAAP operating margin expanded three percentage points to approximately 10% [4] - Subscription gross margin was 81.8%, above the long-term target of 80% [26] - Operating margin increased 340 basis points to a record 9.7%, exceeding guidance by 270 basis points [26] - Adjusted free cash flow margin increased 450 basis points to 8.2% [26] Business Line Data and Key Metrics Changes - Confluent Platform revenue grew 14% to $125.4 million, driven by demand in financial services [24] - Flink ARR for Confluent Cloud grew more than 70% sequentially, with over 1,000 customers using Flink [31][7] - The number of customers with $100k+ ARR increased to 2,533, up 36 sequentially [27] - The number of customers with $1 million+ ARR increased to 234, representing a growth acceleration of 27% [27] Market Data and Key Metrics Changes - Revenue from the U.S. grew 13% to $172.1 million, while revenue from outside the U.S. grew 29% to $126.4 million [24] - Net retention rate stabilized at 114%, with gross retention rate close to 90% [27] Company Strategy and Development Direction - The company is focused on tightening field alignment to drive more use cases into production and expanding its DSP specialist team for multiproduct selling [6][7] - The partner ecosystem sourced over 25% of new business in the last twelve months, indicating strong growth potential [10][11] - The company aims to position itself as a leader in providing real-time data context for AI applications, emphasizing the importance of data streaming in AI deployment [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong cloud consumption growth and the overall performance of the data streaming platform [22][36] - The company expects subscription revenue for 2025 to be in the range of $295.5 million to $296.5 million, representing approximately 18% growth [29] - For fiscal year 2025, subscription revenue is expected to be between $1.1135 billion and $1.1145 billion, indicating approximately 21% growth [29] Other Important Information - The company highlighted the successful integration and growth of WarpStream, which has seen eightfold growth in consumption since its acquisition [14][35] - The company has maintained a win rate above 90% in replacing CSP streaming offerings, with average deal sizes more than doubling over the past two quarters [11][12] Q&A Session Summary Question: Insights on go-to-market changes and pipeline conversion trends - Management noted that the specialization model for DSP and field execution improvements have driven strong pipeline progression, with high confidence in the late-stage pipeline [40][41] Question: RPO and CRPO as leading indicators - Management confirmed that RPO is a key leading indicator for the Confluent platform, while for Confluent Cloud, the focus is on new use cases moving into production [45][46] Question: Growth outlook and cannibalization effects - Management indicated that new offerings have proven to be a substantial tailwind, leading to larger deal sizes and increased customer engagement [54] Question: Flink adoption and future business impact - Management expressed excitement about Flink's growth and its potential to drive significant business opportunities in the future [76][78] Question: AI use cases and customer readiness - Management highlighted various AI use cases across industries, emphasizing the importance of data flow and quality in achieving successful AI deployments [86][87]

Financial Performance - Q3'25 subscription revenue reached $286337000, a 19% year-over-year increase[8] - Q3'25 cloud revenue was $161000000, representing a 24% year-over-year growth[8] - The company achieved a non-GAAP operating margin of 97% in Q3'25, a 34 percentage point increase year-over-year[8] - Adjusted free cash flow margin was 82% in Q3'25, up 45 percentage points year-over-year[8] - The dollar-based net retention rate was 114%[8] Customer Growth - The number of customers with at least $20000 in ARR increased by 7% year-over-year[63] - Customers contributing $100000 or more in ARR increased by 10% year-over-year[63] - The number of customers with at least $1000000 in ARR increased by 27% year-over-year[63] Market and Strategy - The company estimates a total addressable market (TAM) exceeding $100 billion[48, 74] - The company is focused on managing net dilution to below 2% long-term[69, 72] - The company is creating a data streaming platform[74]

Core Insights - Confluent, Inc. is a significant player in the data streaming industry, offering solutions for real-time data processing [1][4] - The consensus price target for Confluent's stock has fluctuated, with a recent increase to $24 from $22, indicating a shift in analyst sentiment [1][5] - Confluent has a substantial addressable market of $100 billion and serves blue-chip customers, enhancing its business model [4] Price Target and Analyst Sentiment - The average price target for Confluent's stock was $24 last month, up from $22 in the previous quarter, but down from $27.63 a year ago [1][5] - Analyst Rudy Kessinger from D.A. Davidson has set a price target of $44 for Confluent, reflecting a positive outlook despite recent fluctuations [2] Stock Performance and Market Conditions - Confluent's stock saw a 7.6% increase in its price during the last trading session, driven by higher-than-average trading volume [3][5] - Current trends in earnings estimate revisions may not support a continued upward trajectory in the near term, suggesting caution for investors [3] Financial Position and Valuation - Confluent holds nearly $2 billion in cash reserves, indicating a strong financial position [4][5] - The company trades at low enterprise value to revenue multiples of 5.2x for fiscal year 2025 and 4.4x for fiscal year 2026, making it an attractive investment opportunity [4]

Gold Market - Gold prices have reached record levels above $4,000 for the first time, with a return of over 50% in 2025 alone [6][7][8] - Experts suggest that gold should be a permanent position in diversified portfolios, typically around 5% allocation, due to its historical role as a store of value [8][9][10] - The gold market is estimated to be $25 trillion, about half the size of the US stock market, indicating significant potential for growth as it catches up with stock market performance [11] Tesla - Tesla has unveiled cheaper versions of its Model Y and Model 3 in an effort to boost sales following the expiration of the federal EV tax credit [42][44] - Analysts predict that while these cheaper models may help sales volume marginally, a significant drop in sales is expected due to the tax credit expiration and cooling EV sales overall [43][44][48] - Concerns have been raised about Tesla's stagnant vehicle portfolio, with only one new model introduced in over five years, leading to a loss of market share to competitors [51][53] Coffee Industry - Dunkin' has opened its 10,000th US location and plans to double its footprint, targeting growth in the afternoon segment with a new pilot program [60][61][62] - The company emphasizes its market leadership in coffee sales and aims to compete effectively against rivals like Starbucks and Dutch Bros by enhancing its afternoon offerings [63][64] - Dunkin' is leveraging its rewards program and targeted offers to maintain consumer engagement and manage costs amid rising commodity prices [68][70] Luxury Housing Market - The luxury housing market is experiencing a paradox where prices are rising by 4% year-over-year, yet sales have fallen to their lowest levels in over a decade [79][80] - Economic uncertainty and concerns about a potential downturn are causing buyers to hesitate, leading to a decrease in demand despite elevated inventory levels [81][84] - Regional variations exist, with some areas like West Palm Beach seeing price increases while others, such as Tampa, are experiencing declines [86] Stable Coins - The total market capitalization for stable coins has surpassed $300 billion, with predictions that it could reach $1.5 trillion by 2030 [24][26] - Stable coins are primarily used for trading within the crypto markets, cross-border payments, and digital commerce, providing a stable alternative to more volatile cryptocurrencies [27][28] - Major players in the stable coin market include Tether and Circle, which together control over 80% of the market, with significant backing from US Treasury bills [29][30]