The News: Confluent Q2 2022 revenue climbed 58 percent to $139 million from the same quarter in 2021, while Confluent Cloud revenue of $47 million is up 139% year over year, with corresponding huge increases in customer count across all segments. Read the full Press Release on the Confluent website.

Confluent Q2 2022 Revenue Up 58% to $139M as Growth Continues

Analyst Take: Confluent’s Q2 2022 revenue of $119 million brought more positive news for the open-source data-in-motion software vendor, as the company again posted strong customer growth at all segments tracked, up to and including clients like Adobe, with $1M of ARR, which has continued for the last several earnings periods.

Here are Confluent’s Q2 2022 results by the numbers:

Total revenue of $139 million, up 58% year over year
Confluent Cloud revenue of $47 million, up 139% year over year
Remaining performance obligations of $591 million, up 81% year over year
857 customers with $100,000 or greater in ARR, up 39% year over year

One of the big factors for Confluent’s Q2 revenue growth is that it reported a 39% increase in customers with greater than $100,000 or greater of ARR, which is a notable uptick.

These are all good results for Confluent and its open source-based enterprise Kafka cloud software platform, which delivers a wide range of capabilities to customers who are focused on delivering an underpinning platform for a company’s digital transformation efforts. Confluent is positioning itself at the heart of a company’s digital transformation efforts and as a nervous system designed to enable rapid data flow across the enterprise.

Image Source: Confluent

These latest earning numbers again demonstrate impressive continuing growth for Confluent, and further illustrates the growing power of their freemium model, building on a successful open-source project and delivering value-add services.

By offering a cloud-based platform solution, we believe that Confluent is putting itself in a good position in this competitive marketplace. This cloud platform focus is starting to manifest itself in the results (see below) and places the company on strong footing going forward.

Image Source: Confluent

The challenge here for Confluent is that investors will be looking for a continuation of growth at this rate in the future, and a continued focus on the count of large customers growing quarter on quarter.

The company also provided strong transparency around how it handles pay-as-you-go offerings and committed customer contracts early in its funnel.

Confluent Earnings Guidance Through 2022

As part of its Q2 2022 earnings report, Confluent also provided earnings guidance for the rest of 2022. Like every other organization today, Confluent and other tech and consumer companies are doing business in a challenging global macroeconomic environment. The company is seeing increased scrutiny as part of buying decisions relating to its solutions and expects to see a $2 to $4 million impact on previous revenue projections through the rest of 2022.

For the full year 2022, Confluent expects to report revenue in the range of $567 million to $571 million, as well as non-GAAP net loss per share between $(0.73) to $(0.69) per share.

Confluent Earnings Overview

Confluent is a high-growth company that has yet to post a profit. In the current macroeconomic climate, this represents a tough place to be, which has been reflected in the stock’s decline in the early part of the year.

However, I believe this only tells part of the story. I am bullish on the company’s long-term prospects due to the fact that the company has pioneered a completely new category of data infrastructure called “data in motion.” This offering is getting traction with customers, including leading companies across various industries such as Netflix, Walmart, Goldman Sachs, Robinhood, BMW, and many more. When you couple this pioneering product with a team of founders from LinkedIn, who created the open-source Apache Kafka, and consider that Kafka is used by 70 percent of the Fortune 500, I can see a clear path to a strong future ahead, especially when the company is providing future guidance that it expects to operate at ~70% gross margin.

Confluent has had a wild ride since its IPO in June of 2021, where it raised $825 million as part of the offering. The stock proceeded to double in price by November 2021, reaching $93 per share before having a major correction by over 75%. This level of volatility is in line with other high-growth businesses that have yet to make it to profitability and as such, does not unduly concern.

Confluent is well positioned to sell into a $50 billion Total Addressable Market (TAM) across Application infrastructure ($31B), Database Management ($7B), Data Integration ($4B) and Data Analytics ($7B). With this market forecasted to grow at a rapid 20%+ CAGR, and projected to reach ~$90+ billion by 2024 based on consensus estimates, I see strong growth ahead for the company.

We are encouraged to see Confluent continuing to make progress with the development of its cloud platform, as well as strategically focusing on enterprise customers with a spend of over $1m in ARR per year, both of which will help the company continue to scale as it faces growing competition.

But the path to profitability will be paramount for Confluent’s future, so the company cannot continue to rely on growth alone if it is to fulfil its early promise.

It will be interesting to watch how Confluent responds to a challenging macroeconomic climate and how this weighs on purchasing decisions moving forward. We are confident that the company’s executive leadership, especially in the technical space, will provide solid guidance and decision-making for this rapidly growing open-source vendor.

Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.