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

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 $17.12 as of August 4^th. CFLT’s forward P/E was 47.85 according to Yahoo Finance.

Confluent reported strong Q2 2025 results, with revenue rising 20.1% YoY to $282.3M, driven by robust subscription revenue of $270.8M (96% of total) and cloud growth of 28% YoY to $150.5M, now 53% of revenue. Non-GAAP operating margin expanded to 6.3%, up 580 bps YoY, while free cash flow margin improved to 3.9%. EPS of $0.09 beat estimates by 12.5%.

Remaining performance obligations grew 31% YoY to $1.16B, and billings surged 54% YoY, supported by strong late-stage pipeline growth of over 40% QoQ. Customer metrics remained healthy at the high end, with $1M+ ARR customers up 24% YoY to 219, though mid-market growth was muted and net new ARR declined 37% YoY.

Product momentum continued across data streaming and DSP offerings. Flink ARR nearly tripled in H1 to $10M, with three $1M+ customers, while WarpStream adoption delivered 30% higher Confluent spend and significant infrastructure savings. Competitive displacements against cloud service providers exceeded two dozen in Q2, supported by differentiated offerings like Break Clusters and WarpStream. AI-driven workloads are scaling across verticals, including use cases in real-time personalization, vector database integration, and regulatory automation. Partner-sourced revenue contributed over 20% of total sales, reflecting growing ecosystem leverage.

Despite these positives, headwinds persist from cloud consumption optimization by large customers, which dampened sequential growth and drove NRR to 114% from 117% last quarter. A major AI-native customer’s workload shift to self-managed infrastructure is expected to pressure Q4 cloud growth. Nevertheless, management raised FY25 guidance, projecting subscription revenue of $1.105–$1.110B (+20% YoY) and maintaining its long-term opportunity in the $100B+ data streaming market, supported by expanding DSP adoption and strategic partnerships.

Previously, we covered a bullish thesis on GitLab Inc. by Compounding Your Wealth in March 2025, which highlighted strong enterprise expansion, AI-driven product adoption, and margin gains. The company’s stock price has depreciated by approximately 6% since our coverage. This is because macro headwinds impacted growth visibility. The thesis still stands as GitLab remains positioned for AI-led DevSecOps expansion. Sergey shares a similar view but emphasizes Confluent’s DSP growth and AI-driven workloads.

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Disclosure: None.