What’s Behind The Recent Surge In Confluent Stock?

Confluent (NASDAQ: CFLT), a data streaming company, recently released its Q4 results, with revenue and earnings slightly above the street estimates. It reported sales of $261 million and adjusted earnings of $0.09 per share, compared to the consensus estimates of $257 million and $0.06, respectively. The company benefited from new customer additions. Confluent’s outlook was also better than the market expectations, boding well for its stock. 

CFLT stock, with 34% returns since the beginning of 2024, has fared slightly better than the S&P 500 index, up 27%. With the company’s ability to stream real-time data, the AI boom has boded well for CFLT stock lately. But, if you want an upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

How Did Confluent Fare In Q4?

Confluent’s revenue of $261 million in Q4 reflected a 23% y-o-y growth. The company posted a 24% jump in subscription revenue to $251 million. Confluent continued to benefit from its cloud offerings, which saw a 38% y-o-y growth. It also saw a 12% rise in customer base that garner annual revenue of $0.1 million or higher. Confluent announced it partnership with Jio Platforms to become the pioneer data streaming platform for Jio Cloud Services in India. It also expanded its existing partnership with Databricks.

While the company saw a solid revenue growth, its operating margin contracted by a modest 10 bps to 5.2% in Q4. Confluent’s bottom line of $0.09 was unchanged compared to the prior-year quarter. Looking forward, the company expects its sales of $1.117 billion to $1.121 billion and earnings of $0.35 per share in 2025.

How Does This Impact CFLT Stock?

Confluent posted a Q4 beat and its stock is up 12% in after market hours. The stock growth is being driven by the company’s recently announced partnerships. In fact, CFLT stock has had a very volatile ride over the last few years. Furthermore, the changes in CFLT stock have been far from consistent, with annual returns being considerably more volatile than the S&P 500.

In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and ongoing trade wars, could CFLT face a similar situation as it did in 2022, 2023, and 2024 and underperform the S&P over the next 12 months — or will it see a recovery? We think there may be some room for growth from here. At its current levels of $30, CFLT trades at 10x trailing revenues, aligning with the stock’s average P/S ratio over the last three years. The company’s robust revenue growth, combined with its new strategic partnerships that could drive future sales expansion, justifies a case for a higher valuation multiple.

While CFLT stock looks like it has more room for growth, it is helpful to see how some of its peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/12/2025
[2] Cumulative total returns since the end of 2016

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