Why Confluent Stock Popped Today
Key Points
Confluent is earning a central place within businesses' data integration toolsets.
The software company's profit margins are rising as customers spend more on its services.
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Shares of Confluent (NASDAQ: CFLT) climbed on Tuesday after the data streaming platform provider posted solid third-quarter results.
As of 3 p.m. ET, Confluent's stock price was up more than 7% after rising as much as 15% earlier in the day.
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Accelerating customer adoption
Confluent's subscription revenue leapt 19% year over year to $286 million, driven by a 24% jump in cloud revenue to $161 million.
The software supplier's dollar-based net retention rate checked in at 114%, as its existing customers spent more on its services than they did in the prior year. The number of customers who spent at least $100,000 and $1 million on its platform rose by 10% and 27%, respectively, to 1,487 and 234.
Better still, Confluent's profitability is improving as it scales its revenue base. Its GAAP operating loss was $83.3 million, compared with $93.7 million in the third quarter of 2024.
Meanwhile, Confluent's adjusted operating income -- which strips out stock-based compensation charges, acquisition-related expenses, and other items -- surged by 84% to $29 million, as its adjusted operating margin increased to 9.7% from 6.3% in the prior-year period.
In turn, Confluent's adjusted earnings per share increased by 30% to $0.13. That was well above Wall Street's estimates, which had called for earnings of $0.10 per share.
Management sees more AI-driven gains ahead
Confluent is attempting to entrench its data streaming platform as the "central nervous system" for its corporate customers. By connecting to a wide array of data sources and enabling its clients to easily view and filter that information in real time, Confluent seeks to provide the context required by modern, AI-powered enterprises.
"As AI evolves from innovation to utilization, context will define who wins, and we are committed to making Confluent the company enabling the shifts by turning data into continuously refreshed, trustworthy context for AI systems everywhere," CEO Jay Kreps said during a conference call with analysts.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Confluent. The Motley Fool has a disclosure policy.
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