Docusign (DOCU -1.61%) and Confluent (CFLT -0.19%) both help companies streamline their businesses with their cloud-based services. Docusign is the world's largest provider of e-signature services, while Confluent's platform processes real-time data as it flows between different applications across an organization.
But over the past 12 months, Docusign's stock price rose 44% as Confluent's stock slumped 13%. Let's see why the e-signature services leader outperformed the "data in motion" company by such a wide margin -- and if it will remain the better investment over the next few years.
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The differences between Docusign and Confluent
Docusign serves over 1.4 million customers in 180 countries, and it's been used in more than a billion transactions. It generates most of its revenue from subscriptions to its e-signature platform, its contract lifecycle management (CLM) tools, and other cloud-based services.
Confluent served 6,140 customers in its latest quarter. Its namesake platform runs on Apache Kafka, an open-source platform for streaming data, but it adds additional analytics tools to differentiate itself from other "Kafka-as-a-service" providers. It generates its revenue from a mix of subscriptions and more flexible consumption-based fees.
Which company is growing faster?
Docusign's growth is driven by the growing usage of digital documents and e-signatures as they replace their pen-and-paper counterparts. Confluent's growth is fueled by a need to evaluate data as it streams across the silos of a large organization. That real-time analysis gets everyone on the same page to make faster decisions.
From fiscal 2021 to fiscal 2025 (which ended this January), Docusign's revenue grew at a CAGR of 20% as its adjusted gross margin rose from 79% to 82%. It also turned profitable on a generally accepted accounting principles (GAAP) basis over the past two fiscal years as it downsized its workforce and streamlined its spending.
But from fiscal 2025 to fiscal 2028, analysts expect Docusign's revenue to grow at a slower CAGR of 8% as its core market matures, it laps some earlier-than-expected contract renewals from fiscal 2024, cautiously expands its new AI-driven Intelligent Agreement Management (IAM) platform, and deals with tougher competitive and macro headwinds.
Analysts expect its GAAP EPS to decline in fiscal 2026 as it expands its lower-margin IAM platform while lapping some big buybacks and one-time tax benefits. But over the following two years, they expect its EPS to grow at a CAGR of 41% as it scales up its IAM platform and streamlines its spending.
From 2020 to 2024, Confluent's revenue rose at a CAGR of 42% as its adjusted gross margin expanded from 70% to 79%. That growth was driven by the accelerating adoption of real-time data streaming services (especially among larger enterprise customers), the expansion of its higher-margin cloud-based ecosystem with more analytics tools, and its new overseas customers. But it's still never been profitable on a GAAP basis.
From 2024 to 2027, analysts expect its revenue to grow at a CAGR of 19% as it gradually narrows its net losses. Its biggest potential catalysts include the growth of its cloud platform, fresh tailwinds from the booming AI market, and the expansion of its enterprise and overseas businesses.
Which stock is a better value right now?
Docusign's stock trades at 61 times forward earnings and 5 times this year's sales. Confluent can't be valued by its profits, but it trades at 7 times this year's sales.
However, Docusign's insiders sold nearly 2.1 million shares over the past 12 months while only buying around 1,300 shares. Confluent's insiders bought 17.2 million shares and sold 17.6 million shares during the same period. That warmer insider sentiment suggests that Confluent might have a bit more upside potential than Docusign.
The better buy: Confluent
Docusign's stock rose over the past year as the bulls cheered the growth potential of its IAM platform in the AI market, but it's still being valued as a growth stock as its core business matures. Confluent should continue growing at a faster rate as its cloud platform expands, and its stock seems more reasonably valued relative to its growth potential.
I wouldn't rush to buy either of these cloud-oriented stocks right now. But if I had to choose one over the other, I'd probably avoid Docusign and bet on a stronger recovery for Confluent -- which stands to process a lot more streaming data as the cloud and AI markets expand.
