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Confluent (NASDAQ:CFLT) Posts Better-Than-Expected Sales In Q3, Stock Jumps 16.2%


Petr Huřťák /
2022/11/02 4:24 pm EDT
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Data infrastructure software company, Confluent (NASDAQ:CFLT) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 47.9% year on year to $151.7 million. Guidance for next quarter's revenue was $162 million at the midpoint, which is 1.09% above the analyst consensus. Confluent made a GAAP loss of $116 million, down on its loss of $95.6 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 FY2022 Highlights:

  • Revenue: $151.7 million vs analyst estimates of $144.8 million (4.76% beat)
  • EPS (non-GAAP): -$0.13 vs analyst estimates of -$0.17
  • Revenue guidance for Q4 2022 is $162 million at the midpoint, above analyst estimates of $160.2 million
  • Free cash flow was negative $45.5 million, compared to negative free cash flow of $36.9 million in previous quarter
  • Customers: 921 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 64.9%, up from 63.7% same quarter last year

“The data streaming era is here. The need for real-time data is pushing data streaming from the edges to the core of modern organizations,” 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.

Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.

Sales Growth

As you can see below, Confluent's revenue growth has been exceptional over the last two years, growing from quarterly revenue of $61.4 million in Q3 FY2020, to $151.7 million.

Confluent Total Revenue

And unsurprisingly, this was another great quarter for Confluent with revenue up 47.9% year on year. Quarter on quarter the revenue increased by $12.3 million in Q3, which was in line with Q2 2022. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Guidance for the next quarter indicates Confluent is expecting revenue to grow 35% year on year to $162 million, slowing down from the 70.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 32% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Large Customers Growth

You can see below that at the end of the quarter Confluent reported 921 enterprise customers paying more than $100,000 annually, an increase of 64 on last quarter. That's in line with the number of contracts wins in the last quarter and quite a bit again above what we have typically seen over the last year, confirming the company is sustaining a good pace of sales.

Confluent customers paying more than $100,000 annually

Key Takeaways from Confluent's Q3 Results

Since it has still been 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 $7.25 billion and more than $1.93 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Confluent delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Overall, this quarter's results seemed positive and shareholders can feel optimistic. The company is up 16.2% on the results and currently trades at $25.98 per share.

Should you invest in Confluent 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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