Confluent’s first quarter results were marked by strong year-on-year revenue growth and a notable improvement in operating margin, but the market response was negative following management’s acknowledgment of slower cloud consumption among large customers. CEO Jay Kreps explained that while core data streaming workloads remain mission critical, “a bit of lower consumption in our larger customers on the cloud side” was observed due to both cost optimization and a reduced pace of deploying new use cases. The company also saw its highest net customer additions in three years, driven by success in both its cloud and on-premises platform offerings.
Is now the time to buy CFLT? Find out in our full research report (it’s free).
Confluent (CFLT) Q1 CY2025 Highlights:
- Revenue: $271.1 million vs analyst estimates of $264.3 million (24.8% year-on-year growth, 2.6% beat)
- Adjusted EPS: $0.08 vs analyst estimates of $0.07 (18.3% beat)
- Adjusted Operating Income: $11.59 million vs analyst estimates of $8.01 million (4.3% margin, 44.6% beat)
- The company dropped its revenue guidance for the full year to $1.11 billion at the midpoint from $1.12 billion, a 1.3% decrease
- Management raised its full-year Adjusted EPS guidance to $0.36 at the midpoint, a 2.9% increase
- Operating Margin: -37.3%, up from -51.3% in the same quarter last year
- Billings: $267.3 million at quarter end, up 26.1% year on year
- Market Capitalization: $8.17 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Confluent’s Q1 Earnings Call
- Pinjalim Bora (JPMorgan) asked about the sustainability of existing cloud use case consumption, to which CEO Jay Kreps replied that large customer usage had stabilized but was not rebounding, prompting a conservative outlook.
- Matthew Hedberg (RBC) inquired about the pace of new product adoption, especially DSP components like Flink and Tableflow. Kreps noted strong early momentum but said financial guidance does not yet assume major contributions from these products.
- Michael Turrin (Wells Fargo) questioned how AI-related use cases are evolving and whether they are material to growth. Kreps said AI demand is promising but still early, with both AI-native companies and enterprises exploring Confluent’s solutions for real-time data.
- Sanjit Singh (Morgan Stanley) asked about the differences in optimization trends now compared to previous cycles. Kreps responded that previous large-scale optimization is largely complete, reducing the risk of further dramatic pullbacks.
- Jason Ader (William Blair) sought clarity on whether macro uncertainty could delay AI adoption. Kreps acknowledged that customers are cautious but has not yet seen major project delays, though this is factored into guidance.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) whether large cloud customers resume new workload additions or remain cautious, (2) the pace at which new products like Tableflow and Flink scale across cloud and on-premises environments, and (3) continued growth in high-value customer cohorts, particularly $1 million+ ARR clients. The effectiveness of OEM partnerships and hybrid deployment strategies will also be important markers for execution.
Confluent currently trades at $24.26, up from $23.76 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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