What Happened?

Shares of data infrastructure software company, Confluent (NASDAQ:CFLT) jumped 21.4% in the morning session after the company reported impressive third-quarter results. Revenue and EPS exceeded Wall Street's estimates. Notably, Confluence cloud revenue grew 42% year on year. Looking ahead, CFLT provided an optimistic full-year EPS forecast, which blew past analysts' expectations. Its gross margin also improved. Zooming out, we think this was a strong quarter featuring some areas of strength.

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What The Market Is Telling Us

Confluent’s shares are very volatile and have had 28 moves greater than 5% over the last year. But moves this big are rare even for Confluent and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock gained 30.4% on the news that the company reported fourth-quarter results, which beat analysts' revenue expectations and turned free cash flow positive for the first time. Its full-year revenue guidance came in higher than Wall Street's estimates. While revenue guidance for next year suggests a slowdown in growth, that was mostly expected. 

Lastly, the company noted that the transition to a pure consumption-based (gives customers more flexibility as they only pay for what they use) business model is almost done. As a result, the company will only provide subscription revenue guidance moving forward. Zooming out, this was still a very good quarter, showing that the company is staying on track.

Confluent is up 15.9% since the beginning of the year, but at $26.36 per share, it is still trading 23.7% below its 52-week high of $34.53 from March 2024. Investors who bought $1,000 worth of Confluent’s shares at the IPO in June 2021 would now be looking at an investment worth $585.07.

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