Welcome to Market Catalyst. I'm Julie Hyman. We are 30 minutes into the US trading day.Here's what we're watching this hour. First up, gold's record rally powers higher. We'll look at how you should be incorporating the metal into your portfolio.Plus, Tesla unveils cheaper models, but is it enough to boost sales. We'll discuss. and we'll get a read on the state of coffee competition with the president of Duncan.All that and more on Market Catalysts. Let's get a check on the major averages and dig into what' ...

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Confluent, Inc. and its officers or directors, following a significant drop in the company's stock price after disappointing financial results [1][3]. Financial Performance - On July 30, 2025, Confluent reported its second-quarter financial results, indicating that consumption growth was negatively affected by ongoing optimization efforts, with month-over-month trends lagging behind previous years [3]. - The company's Chief Financial Officer noted that an AI-native customer shifted towards self-management of internal data platforms, leading to a reduction in Confluent Cloud usage [3]. - Following the earnings announcement, Confluent's stock price decreased by $8.68 per share, representing a decline of 32.86%, closing at $17.73 per share on July 31, 2025 [3].

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Confluent, Inc. regarding possible violations of federal securities laws and unlawful business practices affecting stockholders [1][2]. Investigation Details - The investigation is focused on whether Confluent has engaged in practices that may have harmed investors, particularly in light of recent financial disclosures [2]. - Investors who have suffered losses and are interested in discussing their legal rights are encouraged to contact the law firm [3]. Company Financial Performance - On July 30, 2025, Confluent announced its second-quarter financial results, revealing that consumption growth was negatively impacted by ongoing optimization efforts and a shift by an AI-native customer towards self-management of data platforms [6]. - Following this announcement, Confluent's stock price dropped by $8.68 per share, or 32.86%, closing at $17.73 per share on July 31, 2025 [6].

Core Viewpoint - Confluent, Inc. is under investigation for potential violations of federal securities laws following a significant drop in stock price after the release of its Q2 2025 financial results, which indicated a reduction in revenue growth due to a major client's shift towards self-management of data platforms [1][2]. Financial Performance - On July 30, 2025, Confluent reported its Q2 2025 financial results, highlighting that an AI-native customer is reducing its usage of Confluent Cloud, which is expected to dampen Q4 cloud revenue growth by low single digits [2]. - Following this announcement, Confluent's stock price fell by $8.67, or 32.8%, closing at $17.73 per share on July 31, 2025, resulting in financial losses for investors [2].

Core Viewpoint - The Schall Law Firm is investigating Confluent, Inc. for potential violations of securities laws related to misleading statements and undisclosed information impacting investors [1][2]. Group 1: Investigation Details - The investigation centers on whether Confluent issued false or misleading statements and failed to disclose relevant information to investors [2]. - Confluent's Q2 2025 financial results, announced on July 30, 2025, indicated that consumption growth was affected by ongoing optimization, with month-over-month trends lagging behind previous years [2]. - A significant factor in the decline of Confluent's stock was the announcement that an AI-native customer was shifting towards self-management of internal data platforms, leading to reduced usage of Confluent Cloud services [2]. Group 2: Market Reaction - Following the earnings call and the related announcements, shares of Confluent experienced a sharp decline, falling by more than 32.8% the day after the news was released [2].

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Confluent, Inc. and its officers or directors, following a significant drop in the company's stock price after disappointing financial results [1][3]. Financial Performance - On July 30, 2025, Confluent announced its financial results for Q2 2025, indicating that consumption growth was negatively affected by ongoing optimization, with month-over-month trends lagging behind previous years [3]. - The company's stock price fell by $8.68, or 32.86%, closing at $17.73 per share on July 31, 2025, following the earnings call [3]. Legal Investigation - Pomerantz LLP is actively seeking claims from investors of Confluent, suggesting that there may be grounds for a class action lawsuit due to the alleged securities fraud [1].

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud or unlawful business practices involving Confluent, Inc. and its officers or directors, following a significant drop in the company's stock price after disappointing financial results [1][2]. Financial Performance - On July 30, 2025, Confluent announced its second-quarter financial results, revealing that consumption growth was negatively affected by ongoing optimization, with month-over-month trends lagging behind previous years [2]. - The company's stock price plummeted by $8.68 per share, or 32.86%, closing at $17.73 per share on July 31, 2025, in response to the earnings call and the CFO's comments regarding reduced usage of Confluent Cloud by an AI-native customer [2]. Legal Investigation - Pomerantz LLP is actively seeking claims from investors of Confluent, indicating a potential class action lawsuit related to the alleged securities fraud [1]. - The firm has a long history of handling corporate, securities, and antitrust class litigation, emphasizing its commitment to fighting for victims of securities fraud and corporate misconduct [3].

Core Insights - The market is characterized by a clear divergence in performance, driven by AI and large tech companies exceeding expectations, while laggards lack momentum [1][8] Group 1: Company Performance - Meta Platforms reported impressive earnings, with advertising revenue growth accelerating by 2 percentage points to 22% year-over-year, and strong momentum in core business metrics [1] - Microsoft's earnings report showcased stability in gross and operating margins despite significant capital expenditure increases, with a projected EPS of approximately $19.32 for fiscal year 2027 [2] - Adobe is viewed as an undervalued high-quality software company, with AI expected to support its growth vectors, despite current investor sentiment being relatively muted [6] Group 2: AI Impact - Meta attributed its strong advertising performance to AI, which improved the efficiency and revenue of its advertising system, leading to increased conversion rates on Instagram and Facebook [3] - The narrative around AI assistants is driving growth in the internet sector, with companies like Booking Holdings leveraging AI for personalized travel experiences [7] Group 3: Capital Expenditure Trends - Meta and Microsoft have significantly increased their capital expenditures, with Meta's 2026 capital expenditure raised by approximately $25 billion to $100 billion, and Microsoft's adjusted to about $116 billion for fiscal year 2026 [4] Group 4: Market Dynamics - The software industry shows mixed performance, with strong results from Microsoft and ServiceNow contrasted by disappointing results from Check Point and Confluent, indicating a challenging market environment [5] - The public cloud remains a major growth theme, with Microsoft's Azure service revenue growing by 4 percentage points to 39% year-over-year, amid ongoing capacity shortages [6] Group 5: Economic Indicators - Key economic data, including the Employment Cost Index (ECI) and PCE index, are set to be released, alongside ongoing earnings reports from major companies like Amazon and Apple [9]

Core Insights - Confluent reported revenue of $282.29 million for Q2 2025, marking a year-over-year increase of 20.1% and exceeding the Zacks Consensus Estimate by 1.63% [1] - The company's EPS for the same quarter was $0.09, up from $0.06 a year ago, representing a surprise of 12.5% over the consensus estimate of $0.08 [1] Financial Performance Metrics - Remaining performance obligations (RPO) stood at $1.16 billion, surpassing the average estimate of $1.04 billion [4] - Subscription revenue reached $270.83 million, exceeding the average estimate of $267.57 million, with a year-over-year growth of 20.5% [4] - Service revenue was reported at $11.45 million, above the average estimate of $10.18 million, reflecting an 11.4% year-over-year increase [4] - Confluent Cloud revenue was $150.52 million, slightly above the average estimate of $149.48 million, with a significant year-over-year growth of 28.7% [4] - Revenue from Confluent Platform- License was $30.63 million, exceeding the average estimate of $28.44 million [4] - Confluent Platform- PCS revenue was reported at $89.68 million, close to the average estimate of $89.89 million [4] Stock Performance - Confluent's shares have returned +8.1% over the past month, outperforming the Zacks S&P 500 composite's +3.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Subscription revenue grew 21% to $270.8 million, representing 96% of total revenue [26] - Confluent Cloud revenue increased 28% to $150.5 million, accounting for 56% of subscription revenue compared to 52% in the previous year [26] - Non-GAAP operating margin improved to 6%, up approximately six percentage points [5][28] - Adjusted free cash flow margin increased to 3.9% [28] - Net income per share was $0.09 with a diluted share count of approximately 380 million [28] Business Line Data and Key Metrics Changes - Confluent Platform revenue grew 12% to $120.3 million, driven by strong performance in financial services and OEM partners [26] - Flink ARR grew approximately 3x over the past two quarters, approaching $10 million [5][16] - RPO growth accelerated to 31%, indicating deepening customer relationships [8] Market Data and Key Metrics Changes - Revenue from the US grew 15% to $164.3 million, while revenue from outside the US grew 29% to $117.9 million [27] - Total customer growth was in line with the average growth rate of the previous four quarters [29] - 20k+ ARR customer count grew approximately 8% to 2,497, representing over 95% of ARR [29] Company Strategy and Development Direction - The company is focusing on three key areas: replacing CSP streaming offerings, enhancing the partner ecosystem, and expanding Flink [10][12][34] - The partner ecosystem has sourced over 20% of the business in the past year, with significant partnerships established [14][35] - The company aims to capture a meaningful share of the $100 billion data streaming market [24] Management's Comments on Operating Environment and Future Outlook - Management noted that larger customers are optimizing their usage, which is expected to impact consumption growth in the near term [6][30] - Despite consumption headwinds, management remains confident in the strength of the business and the potential for growth in AI workloads [23][34] - The outlook for Confluent Cloud assumes month-over-month growth rates will remain notably below historical averages for the remainder of the year [31] Other Important Information - The company is seeing early success in operational enhancements aimed at improving customer engagement and driving use case expansions [9][33] - The Flink offering is central to the company's strategy for real-time data processing, with significant growth observed [17][34] Q&A Session Summary Question: Can you elaborate on the consumption optimization trends? - Management indicated that the optimization is a broader trend seen across various companies, with some customers reducing their Confluent Cloud usage due to internal changes [37][40] Question: How do you see production AI workloads impacting subscription growth? - Management believes that the relevance of streaming and processing in AI applications will positively impact subscription growth moving forward [43][45] Question: What is the outlook for NRR and GRR metrics? - Management expects near-term pressure on NRR and GRR due to current consumption patterns but sees potential tailwinds from operational improvements and customer commitments [98][99] Question: How is the company addressing the challenges in the 20k+ customer segment? - Management acknowledged the need to focus on this segment and is implementing strategies to drive growth, particularly through CSP takeouts [78][80]