Confluent’s cloud growth engines keep on firing, sending its stock soaring

Big-data streaming software provider Confluent Inc. posted solid financial results and strong guidance for the current quarter, and announced a key new partnership with Databricks Inc. today, sending its stock soaring more than 14% in extended trading.

The company reported fourth-quarter earnings before certain costs such as stock compensation of nine cents per share, surpassing Wall Street’s consensus estimate of just six cents per share. Revenue for the period rose 23%, to $261.2 million, ahead of the analysts’ target of $256.8 million.

All told, Confluent posted a net loss of $105.8 million, down from the $84.7 million loss it reported in the same period one year earlier.

The company is viewed as one of the darlings of the rapidly growing big-data industry, which is being boosted by rising demand for generative artificial intelligence. It’s the developer of the popular open-source data streaming platform Apache Kafka, which is used by companies to track data points such as sales, orders, trades and customer feedback in real time. This information is delivered via real-time data streams, which can be analyzed for insights using Confluent’s tools.

It’s an important capability because the Apache Kafka software is used by more than 80% of the Fortune 500, and it is increasingly being seen as a key component of AI systems due to its ability to rapidly analyze new data as it’s created. One of its most notable customers is OpenAI, the AI startup that’s widely credited with kicking off the generative AI craze.

Confluent has been growing fast, and most of that growth stems from its cloud-based offering, Confluent Cloud. It’s an enterprise-grade version of Apache Kafka that customers can run on Amazon Web Services, Google Cloud and Microsoft Azure, but it’s notably much simpler to deploy and manage than the open-source Kafka.

The company launched Confluent Cloud around two-and-a-half years ago, and it has since become its main revenue driver. During the quarter, Confluent Cloud sales jumped 38% from a year earlier to $138 million.

Co-founder and Chief Executive Jay Krebs (pictured) praised the company for beating all of its guided metrics during the quarter.

“Our momentum reflects the increasing importance of a complete data streaming platform to power mission-critical and real-time AI applications,” he insisted. “The significant partnerships and product innovations we unleashed over the past year have put us in a great position to advance our category lead in 2025.”

Confluent also showed strong momentum in terms of growing its customer base, saying that the number of clients generating at least $100,000 in annual sales rose 12% from a year ago, to 1,381.

The company’s growth is being fueled by the emergence of hundreds of AI applications that are thirsty for real-time data, said analyst Holger Mueller of Constellation Research Inc.

“Confluent provides the data foundation for these next-generation AI applications, and it’s doing well, hitting a $1 billion annual revenue run rate for the first time,” the analyst said. “But that growth came at the cost of profitability, which slipped during the quarter. The company will need to find a way to improve this, because investors generally want to see profits once companies surpass that $1 billion revenue run rate barrier.”

For the first quarter, Confluent sees more good things happening, and it’s forecasting earnings of between six and seven cents per share, the midpoint coming in just ahead of the Street’s target of a six-cent profit. For the full fiscal 2025, it’s aiming for a profit of 35 cents per share, in line with guidance.

Confluent is also hoping for big things from its new partnership with Databricks, which aims to help customers overcome the divide that exists between operational systems where data is generated, and the analytical systems that transform such information into insights.

Such systems tend to exist in separate siloes, which means different processes are applied between the two, making it difficult to marry real-time data with many analytics tools, and it’s this challenge that Confluent is tackling alongside Databricks.

They’re announcing a bidirectional integration between Confluent’s Tableflow and Databricks’ Delta Lake and Unity Catalog to enable real-time data across both systems, paving the way for AI-driven decision-making, the companies said.

“Real-time data is the fuel for AI,” Kreps said. “Together with Databricks, we’re ensuring businesses can harness the power of real-time data to build sophisticated AI-driven applications for their most critical use cases.”

Today’s after-hours gains mean that Confluent’s stock is up just over 7% in the year to date, though it’s still down about 5% over the last 12 months.

Photo: Confluent