Confluent's (NASDAQ:CFLT) Q2 Sales Top Estimates, Stock Soars

Jabin Bastian /
2022/08/03 4:32 pm EDT

Data infrastructure software company, Confluent (NASDAQ:CFLT) beat analyst expectations in Q2 FY2022 quarter, with revenue up 57.8% year on year to $139.4 million. Guidance for next quarter's revenue was $144 million at the midpoint, which is 1.33% above the analyst consensus. Confluent made a GAAP loss of $117.6 million, down on its loss of $88.1 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) Q2 FY2022 Highlights:

  • Revenue: $139.4 million vs analyst estimates of $131.8 million (5.71% beat)
  • EPS (non-GAAP): -$0.16 vs analyst estimates of -$0.19
  • Revenue guidance for Q3 2022 is $144 million at the midpoint, above analyst estimates of $142.1 million
  • The company lifted revenue guidance for the full year, from $557 million to $569 million at the midpoint, a 2.15% increase
  • Free cash flow was negative $36.9 million, compared to negative free cash flow of $58.4 million in previous quarter
  • Customers: 857 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 64.4%, down from 66.3% same quarter last year

“Data streaming is a requirement to create the real-time digital experiences and efficient operations that are needed to compete and win,” 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 incredible over the last year, growing from quarterly revenue of $88.3 million, to $139.4 million.

Confluent Total Revenue

This was another standout quarter with the revenue up a splendid 57.8% year on year. On top of that, revenue increased $13.2 million quarter on quarter, a very strong improvement on the $6.21 million increase in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Confluent is expecting revenue to grow 40.3% year on year to $144 million, slowing down from the 66.7% 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 33.2% 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 857 enterprise customers paying more than $100,000 annually, an increase of 66 on last quarter. That is quite a bit more contract wins than last quarter and quite a bit above what we have typically seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Confluent customers paying more than $100,000 annually

Key Takeaways from Confluent's Q2 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 $7.47 billion and more than $1.95 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 the full year guidance exceeded Wall St’s revenue expectations. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 7.72% on the results and currently trades at $31.25 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.