In This Article:
Key Points
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Confluent stock is getting hit with big sell-offs, despite reporting better-than-expected sales and earnings for fiscal Q1.
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While Q1 performance beat expectations, management's forward targets suggest substantial growth deceleration.
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In the face of macroeconomic uncertainty, Confluent is modeling for softer spending from large customers.
Confluent (NASDAQ: CFLT) stock is getting crushed in Thursday's trading following the company's quarterly report yesterday. The company's share price was down 17.3% as of 12:45 p.m. ET, despite the S&P 500 (SNPINDEX: ^GSPC) being up 0.9% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) being up 1.9%.
After market close yesterday, Confluent published results yesterday for the first quarter of its 2025 fiscal year, which ended March 31. The company actually reported sales and earnings for the period that came in ahead of Wall Street's expectations, but investors aren't happy with management's forward guidance.
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Strong Q1 results can't lift Confluent stock
Confluent reported sales of $271.1 million and non-GAAP (generally accepted accounting principles) adjusted earnings per share of $0.08 in fiscal Q1. Meanwhile, the average analyst estimate had targeted sales of $264.39 million and adjusted earnings per share of $0.07.
The company's revenue was up 24.8% year over year in the period, driven by subscription revenue increasing 26% to hit $261 million. Confluent Cloud revenue increased 34% year over year to hit $143 million, and the company closed out last quarter with 1,412 customers generating $100,000 or more in annual recurring revenue. Adjusted earnings per share were up 60% year over year in the quarter.
Investors are selling Confluent stock on a softer growth outlook
Investors aren't putting much weight behind Confluent's big sales beat last quarter due to guidance for substantial growth deceleration in the rest of the year. For the second quarter, the company expects subscription sales to be between $267 million and $268 million -- suggesting growth of roughly 19% at the midpoint of the range.
For the full-year period, subscription revenue is projected to come in between $1.1 billion and $1.11 billion -- representing annual growth of 19.5% at the midpoint. The company attributed the relatively soft outlook to uncertainty surrounding spending from large customers. While management's guidance could wind up being conservative, Confluent has a growth-dependent valuation even after today's pullback -- and investors are worried that macroeconomic headwinds could curb the company's expansion momentum.