Wall Street analysts don't always get things right, but it can pay to listen when they reach a consensus on a particular stock. The Wall Street Journal tracks 34 analysts who cover Confluent (CFLT +0.00%) stock, and the majority have assigned it a buy rating, with no analysts recommending selling.
Confluent developed an industry-leading data streaming platform, which helps some of the world's biggest organizations deliver real-time digital experiences to their customers. But it's also becoming a key proponent of the artificial intelligence (AI) revolution, which could be a major growth driver for the company from here.
Confluent stock is down 74% from its record high, which was set during the tech frenzy in 2021. Its valuation was unsustainable back then, but it's now trading near the cheapest level ever. Here's why Wall Street is right to be optimistic.
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Data streaming is changing the world
Confluent is used by companies in a variety of industries, including retail, banking, and even sports betting. Walmart uses Confluent's platform to connect data between all of its physical stores and its online store so it has a real-time view of its inventory. This means Walmart instantly knows whenever a product is sold, so it can restock the shelves before they run bare. Plus, when shopping online, customers always have up-to-date information on whether a product is available before buying it.
Sports betting and investing platforms use data streaming in a slightly different way. AI allows them to calculate odds or prices, feed them to customers' devices, and accept bets or orders, all in a matter of seconds. Without this technology, they would have to rely on cumbersome phone-based processes, and products like live in-game wagering on sporting events probably wouldn't exist.
Data streaming also plays a pivotal role in AI, because a chatbot can only produce accurate responses if it has access to real-time data on command. Businesses can use Confluent's platform to build data pipelines, which they can plug into ready-made AI models like those created by OpenAI, in order to create a tailored experience for their customers.
For example, let's say you're scheduled to catch a flight tomorrow and you want to inquire about a potential delay or even change your departure date. A mainstream chatbot like OpenAI's ChatGPT can only provide you with generic information, like how much it might cost to bring extra baggage onto a plane. However, if the airline plugs its data pipelines into OpenAI's models, it can create a custom chatbot that can assist with inquiries specific to your flight.
Therefore, companies that invest in data streaming platforms like Confluent could save untold amounts of money over the long term by automating customer service workflows. According to the 2025 Data Streaming Report by Radma Research, 68% of information technology leaders from around the world plan to increase their investments in data streaming over the next two years.
NASDAQ: CFLT
Key Data Points
Accelerating revenue growth, and an improving bottom line
Confluent's subscription revenue came in at $260.9 million during the first quarter of 2025 (ended March 31), a 26% increase from the year-ago period. It marked an acceleration from the 24% growth the company delivered in the final quarter of 2024 three months earlier, which highlights the momentum in its business.
The strong result was driven by two things. First, Confluent's net revenue retention rate was 117% during the quarter, meaning existing customers were spending 17% more money on the platform than they were in the year-ago period. Second, Confluent's customer base grew to a record high of 6,140 businesses, which included a 25% jump in the number of customers spending at least $1 million on its platform annually.
But there is one caveat. Ongoing global trade tensions spurred by President Donald Trump's tariffs could put a dent in economic activity, which would impact corporate spending on platforms like Confluent. As a result, management slightly reduced its revenue guidance for 2025 to $1.11 billion, from $1.12 billion previously (at the high end of the forecast range).
Turning to the bottom line, Confluent made some progress during the first quarter because it carefully managed its operating expenses, which only grew by 13%. Since revenue grew much faster, the company's generally accepted accounting principles (GAAP) net loss shrank by 27% year over year and came in at $67.5 million.
But the company was profitable on a non-GAAP basis, which is a better indicator of how much money the business is generating because it excludes one-off and noncash expenses. Its non-GAAP net income came in at $28.9 million, which was up by a whopping 83% compared to the year-ago period. Confluent's focus on managing costs to drive profitability will create a more sustainable business for the long term.
Wall Street is bullish on Confluent stock
When Confluent stock peaked in 2021, its price-to-sales (P/S) ratio soared to around 60, which was completely unsustainable. But the 74% decline in the stock since then, combined with the company's consistent revenue growth, has pushed its P/S ratio down to 7.8. That is near the cheapest level since the stock went public:
CFLT PS Ratio data by YCharts
Valuation might be one reason Wall Street is bullish right now. The Wall Street Journal tracks 34 analysts who cover Confluent stock, and 21 have assigned it a buy rating. Five others are in the overweight (bullish) camp, and seven recommend holding. While one analyst has given the stock an underweight (bearish) rating, none recommend outright selling.
The analysts have an average price target of $28.13, which implies a potential upside of just 15.5% over the next 12 to 18 months. The Street-high target is a little more juicy at $36, which suggests a potential upside of 47.8% instead.
The consensus target might not sound compelling, but I would urge investors to focus on the longer term. Confluent values its addressable market at more than $100 billion today -- a figure that has doubled since 2021 -- and based on the company's current revenue, it has barely scratched the surface of that opportunity. As AI adoption grows, I would expect Confluent's addressable market to expand even further.
In summary, this stock offers investors a unique, out-of-the-box way to expose their portfolios to the AI boom, and it could be a great long-term buy, especially at the current price.
