Confluent (CFLT) Q2 Revenue Jumps 20%

Key Points

• GAAP revenue rose 20% year over year to $282.3 million in Q2 2025, surpassing consensus GAAP revenue estimates by $3.9 million.

• Non-GAAP earnings per share reached $0.09, beating expectations and up 50.0% year over year.

• Confluent Cloud revenue climbed 28% year over year, but management issued cautious guidance due to consumption trends among large customers.

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Confluent (NASDAQ:CFLT), the data streaming platform behind much of the modern real-time data movement in business, reported its results for the second quarter of fiscal 2025 on July 30, 2025. The most notable news was continued solid revenue growth and margin improvement, with second-quarter revenue coming in at $282.3 million -- 20.0% higher than the prior-year quarter and ahead of analysts’ expectations. Subscription revenue reached $270.8 million and non-GAAP earnings per share were $0.09, both exceeding consensus estimates. Confluent also improved its operating margin significantly compared to last year.

However, management guided cautiously for the next quarter, reflecting more conservative expectations on large customer cloud spending. Overall, the period showed momentum in cloud adoption and new product traction, tempered by a prudent stance on near-term growth projections.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Business Drivers

Confluent is a data infrastructure company focused on enabling real-time data streaming for businesses of all sizes. Its core product is a data streaming platform that allows companies to move and process information quickly and reliably, supporting a wide range of applications, from fraud detection in banking to supply chain management in retail.

The business is anchored in open-source technologies, particularly Apache Kafka, which its founders helped create. Over time, Confluent has expanded the platform to include cloud-native offerings (Confluent Cloud), on-premises deployment (Confluent Platform), real-time data processing with Apache Flink for stream analytics, and newer tools like Tableflow. It supports flexible deployment -- cloud, on-premises, and hybrid -- making it attractive for diverse enterprise needs. Key success factors include broad adoption of open-source technologies, responding to the rise of artificial intelligence (AI), and strong partnerships with top cloud vendors.

Quarter Highlights: Financial and Strategic Performance

The period saw several notable financial developments. Total GAAP revenue grew by 20%, while Subscription revenue climbed 21% year over year. The managed cloud service, Confluent Cloud, posted revenue growth of 28% year over year. This outpaced overall company growth and highlights ongoing adoption of managed cloud data streaming by enterprise customers. Non-GAAP operating margin improved to 6.3%, reflecting significant operating leverage compared with a near break-even margin in the same quarter last year. Adjusted free cash flow also improved to $11.0 million.

Profitability moved in a positive direction: non-GAAP operating income rose from $1.3 million in the prior-year period to $17.8 million, and non-GAAP operating margins climbed 5.7 percentage points. GAAP net loss per share narrowed modestly. The company reported $18.1 million in net cash provided by operating activities, up from $8.6 million a year ago. Stock-based compensation remained substantial at $106.9 million, roughly 37.9% of revenue.

The customer base continued to expand, with customers generating more than $100,000 in annual recurring revenue rising 10% to 1,439. Large customer wins remain a central part of the company’s scaling efforts, and management noted a “record quarter” for new customer adds in recent years, with 340 net new customers added in the first quarter. International sales, and especially deals through strategic partners and original equipment manufacturer (OEM) channels, contributed to the resilience of noncloud segments, complementing the company’s core cloud growth.

Product development and strategic initiatives gained traction. Real-time stream processing, powered by Apache Flink (now integrated into both cloud and on-premises stacks), saw annual recurring revenue (ARR) grow about threefold over the past two quarters. Tableflow, a tool for simplifying table-based data pipelines, was recently released as generally available on Amazon Web Services (AWS) and received strong customer interest. Both new products are still in the early stages of adoption, so management was cautious about forecasting major financial impact in the near term.

Looking Forward: Guidance and Watch Points

Looking ahead, management offered a carefully constructed outlook for the next quarter and the full fiscal year. Subscription revenue for Q3 2025 is expected to be between $281 million and $282 million. The company projects a non-GAAP operating margin of approximately 7% for Q3 2025, and non-GAAP earnings per share of $0.09 to $0.10. For FY2025, the outlook is subscription revenue between $1.105 billion and $1.11 billion, non-GAAP operating margin of approximately 6%, and non-GAAP net income per diluted share of about $0.36.

Management emphasized a cautious approach to guidance, reflecting observed optimization behavior among large cloud customers in the first quarter and April 2025, who are slowing new use case adoption and focusing more on cost control. Unlike previous periods of quick rebound, current guidance assumes a slower or flat pace in large customer consumption. Smaller customer behavior and the pipeline for new customers remain healthy, according to management.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool recommends Confluent. The Motley Fool has a disclosure policy.