Last Update 11 Dec 25

Fair value Increased 10%

CFLT: Sale Exploration And Cloud Stabilization Will Shape Future Share Performance

Analysts have nudged their fair value estimate for Confluent higher from approximately $27.87 to $30.77 per share, reflecting increased confidence in stabilizing cloud consumption, stronger than expected subscription and cloud growth, and improved execution that has driven a series of upward price target revisions across the Street.

Analyst Commentary

Recent Street research has skewed clearly positive, with multiple firms lifting price targets in response to Confluent's improving cloud trends, stronger than expected subscription performance, and a more constructive demand backdrop. Still, some commentary underscores the need for sustained execution before the stock can fully re-rate toward higher valuation multiples.

Bullish Takeaways

Bullish analysts highlight that cloud consumption and customer optimization activity appear to be stabilizing, supporting more durable revenue growth and justifying higher price targets in the high 20 dollar range.
Upside in the latest quarter, particularly from Confluent Cloud and subscription revenue, is viewed as evidence that go to market initiatives are driving broader adoption, strengthening the case for upward revisions to full year revenue outlooks.
Commentary around new use cases moving into production, traction in the Data Stream Platform and Flink, and early momentum in newer products reinforces confidence that Confluent can expand its addressable market and support a premium growth valuation.
The view of Confluent as a de facto standard for data streaming, coupled with the complexity of building similar infrastructure in house, underpins the thesis that the company can sustain above peer growth and progress toward 1 billion dollars in recurring revenue.

Bearish Takeaways

More cautious analysts acknowledge the strong quarter but remain hesitant to move beyond neutral stances, emphasizing the need for more consistent execution before assigning a higher multiple.
While recent results are seen as solid, some note that prior weak quarters and only moderate sales upside temper enthusiasm, suggesting that the growth recovery still needs to prove its durability.
Even with improving trends and raised targets, there is a view that the setup into future years could become more challenging if optimization activity re accelerates or new product momentum slows, limiting further valuation expansion.
Ongoing expectations for a takeover premium, while supportive in the near term, also reflect underlying uncertainty about the optimal long term path to unlock full value as a standalone public company.

What's in the News

IBM entered into a definitive agreement to acquire Confluent for $11.5 billion in cash, or $31 per share. The deal is expected to close by mid 2026 pending shareholder and regulatory approvals.
Confluent is exploring a potential sale after receiving acquisition interest from private equity firms and other technology companies, and has engaged an investment bank to run an early stage process (Reuters).
Reports indicate IBM has been in advanced talks to acquire Confluent for about $11 billion in a bid to strengthen its cloud and AI data infrastructure capabilities (Wall Street Journal).
Confluent launched Confluent Intelligence, Real Time Context Engine, Streaming Agents enhancements, and Confluent Private Cloud, expanding its managed data streaming and AI offerings across public and private infrastructure.
The company issued guidance calling for 18% subscription revenue growth in the fourth quarter of 2025 and approximately 21% growth for full year 2025.

Valuation Changes

The fair value estimate has risen moderately from approximately $27.87 to $30.77 per share, reflecting a higher assessed intrinsic value.
The discount rate has edged down slightly from about 8.80 percent to 8.78 percent, implying a marginally lower perceived risk profile.
The revenue growth forecast is essentially unchanged, moving fractionally from roughly 16.75 percent to 16.75 percent, indicating a stable top line outlook.
The net profit margin expectation has increased slightly from about 12.38 percent to 12.42 percent, signaling a modest improvement in anticipated profitability.
The future P/E multiple has risen meaningfully from approximately 65.6x to 72.2x, suggesting a higher valuation being assigned to forward earnings.

Surging real-time AI adoption and data-driven architectures are making Confluent's platform essential, fueling sustained revenue growth and high customer retention.
Expanded cloud offerings, ecosystem partnerships, and targeted go-to-market strategies are enhancing recurring revenues, margins, and long-term earnings potential.
Persistent customer optimization, competitive pressures, and slow adoption threaten Confluent's cloud revenue growth, margin expansion, and long-term ability to maintain premium positioning.

Catalysts

About Confluent

Operates a data streaming platform in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Rapid growth in real-time AI and agentic workloads is driving increased demand for enterprise-grade streaming and processing solutions, with Confluent seeing a projected 10x expansion in production AI use cases across hundreds of customers. This is likely to accelerate subscription and platform revenue over the medium to long term as these use cases mature and proliferate.
The proliferation of data volumes and the fundamental shift toward real-time, event-driven architectures are expanding Confluent's addressable market, positioning its platform as mission-critical for data-centric digital transformation across industries. This underpins sustained topline revenue growth and strong customer retention.
Expanding adoption of Confluent Cloud and new offerings like WarpStream and Flink, which are showing exponential ARR growth, contribute to higher recurring revenues, improved gross margins, and growing opportunities for multi-product upsell, directly supporting net margin and long-term earnings.
Strengthening and monetizing an extensive partner ecosystem-evidenced by >20% of business being partner-sourced and deepened alliances with global firms-enables broader customer acquisition, global reach, and embedded go-to-market motions. This is expected to drive both revenue growth and improved customer lifetime value.
Strategic investments in sales coverage ratios, go-to-market alignment, and multi-product selling are resulting in a significant increase in late-stage pipeline (+40% QoQ), setting the stage for improved conversion rates, accelerated land-and-expand motions, and improved revenue visibility/operating leverage in future quarters.

Confluent Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Confluent's revenue will grow by 16.5% annually over the next 3 years.
Analysts are not forecasting that Confluent will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Confluent's profit margin will increase from -29.3% to the average US Software industry of 13.1% in 3 years.
If Confluent's profit margin were to converge on the industry average, you could expect earnings to reach $220.6 million (and earnings per share of $0.55) by about September 2028, up from $-311.7 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 57.8x on those 2028 earnings, up from -21.3x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 5.11% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.89%, as per the Simply Wall St company report.

Confluent Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing customer optimization and slower pace of new use case adoption-especially among large clients-are causing persistent headwinds in Confluent Cloud consumption growth, which is now expected to remain notably below prior historical rates for the foreseeable future, directly pressuring top-line cloud revenue and potentially impacting overall subscription revenue growth.
Large AI-native customers are moving towards self-management and reducing usage of fully managed Confluent Cloud offerings, leading to significant reductions in spending and transition to on-premise platforms, which risks margin compression and undermines recurring cloud-based revenue streams.
Competitive intensity from cloud service providers (CSPs) and potential customer migration to open-source alternatives or self-managed Kafka increase pricing pressure and churn risk, potentially impacting Confluent's ability to maintain premium pricing, gross margins, and long-term market share.
The cohort of smaller accounts ($20k–$100k ARR) is showing weak growth compared to larger segments, which could negatively impact the future pipeline for upselling and expansion into larger, more profitable accounts-suggesting possible stagnation in the customer base that fuels sustained ARR and revenue growth.
Despite positive momentum in new products (like Flink), their contribution remains insignificant relative to the overall business, and their growth may not be sufficient in the near
to mid-term to offset decelerating or contracting cloud streaming revenues, posing a risk to net margin expansion and long-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $24.687 for Confluent based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $36.0, and the most bearish reporting a price target of just $20.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $220.6 million, and it would be trading on a PE ratio of 57.8x, assuming you use a discount rate of 8.9%.
Given the current share price of $19.23, the analyst price target of $24.69 is 22.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Cloud Stability And Acquisition Interest Will Impact Future Market Potential