Confluent (NASDAQ:CFLT) Delivers Impressive Q3, Provides Optimistic Guidance For Next Quarter

Jabin Bastian /
2021/11/04 4:28 pm EDT
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Data infrastructure software company, Confluent (NASDAQ:CFLT) announced better-than-expected results in the Q3 FY2021 quarter, with revenue up 66.7% year on year to $102.5 million. Guidance for next quarter's revenue was surprisingly good, coming in at $109 million at the midpoint, 14.6% above what analysts were expecting. Confluent made a GAAP loss of $95.6 million, improving on its loss of $138.1 million, in the same quarter last year.

Is now the time to buy Confluent? Access our full analysis of the earnings results here, it's free.

Confluent (CFLT) Q3 FY2021 Highlights:

  • Revenue: $102.5 million vs analyst estimates of $90.7 million (13% beat)
  • EPS (non-GAAP): -$0.17 vs analyst estimates of -$0.23
  • Revenue guidance for Q4 2021 is $109 million at the midpoint, above analyst estimates of $95 million
  • Free cash flow was -$20.6 million, compared to negative free cash flow of -$45.4 million in previous quarter
  • Customers: 664 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 63.6%, down from 69% same quarter last year

“Harnessing the power of data in motion is a major factor in determining which organizations win in the modern era,” said Jay Kreps, co-founder and CEO, Confluent.

Started in 2014 by the team of engineers at LinkedIn who originally built it as an internal tool, Confluent (NASDAQ:CFLT) provides infrastructure software for organizations that makes it easy and fast to collect and move large amounts of data between different systems.

Businesses have a growing need to access data and insights generated by their systems in real time. In order to achieve that they need to connect the piles of data stored and siloed in separate databases and that drives demand for software infrastructure that can connect, integrate and distribute data fast.

Sales Growth

As you can see below, Confluent's revenue growth has been incredible over the last year, growing from quarterly revenue of $61.4 million, to $102.5 million.

Confluent Total Revenue

This was another standout quarter with the revenue up a splendid 66.7% year on year. On top of that, revenue increased $14.2 million quarter on quarter, a very strong improvement on the $11.3 million increase in Q2 2021, and a sign of re-acceleration of growth, which is very nice to see indeed.

Analysts covering the company are expecting the revenues to grow 28.8% over the next twelve months, although estimates are likely to change post earnings.

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Large Customers Growth

You can see below that at the end of the quarter Confluent reported 664 enterprise customers paying more than $100,000 annually, an increase of 47 on last quarter. That is a bit less contract wins than last quarter but about the same as what we have typically seen over the last year, suggesting that the company still has decent sales momentum, even if this was a weaker quarter.

Confluent customers paying more than $100,000 annually

Key Takeaways from Confluent's Q3 Results

Since it is still burning cash over the last twelve months it is worth keeping an eye on Confluent’s balance sheet, but we note that with a market capitalization of $19.9 billion and more than $1.03 billion in cash, the company has the capacity to continue to prioritize growth over profitability.

We were impressed by how strongly Confluent outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. On the other hand, it was less good to see the pretty significant deterioration in gross margin and there was a slowdown in new contract wins. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 3.24% on the results and currently trades at $76 per share.

Confluent may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.