To The Moon

A Real-Time Data Backbone in the Age of AI

Confluent isn’t just riding the AI wave—it’s powering it from beneath the surface. One Fortune 100 bank, for instance, now uses Confluent Cloud to stream transactional data in real time into fraud detection models, enabling AI to act on behavioural anomalies within seconds instead of hours. As enterprises shift from batch-oriented data processing to real-time, event-driven systems, I see $Confluent, Inc.(CFLT)$ as uniquely positioned to become the connective tissue between operational databases and AI engines.

Where real-time data becomes the bloodstream of machine intelligence

The company’s Kafka-based streaming platform enables high-throughput, low-latency data flows—exactly what large language models and machine learning tools require for real-time decision-making and personalisation. It’s no coincidence that subscription revenue grew 26% year-over-year in Q1 2025, accelerating from 24% the previous quarter. When customer adoption climbs as data demands become more complex, that’s not a trend—it’s a signal.

And it’s not just about landing new logos. Net revenue retention held steady at 117%, and the number of customers spending over $1 million annually grew 25% year-over-year. That tells me Confluent isn’t just gaining ground; it’s becoming mission-critical for enterprises modernising their data stack. The total addressable market for data streaming infrastructure is expected to surpass $100 billion by 2030, driven by AI-led demand for real-time data integration across finance, healthcare, and retail ecosystems.

Financial Momentum Meets Strategic Discipline

For all its high-growth credentials, $Confluent, Inc.(CFLT)$ has begun showing signs of maturing execution. In Q1, the company posted a non-GAAP operating profit of $28.9 million, up 83% year-over-year—a sharp turn from the high-burn, growth at any cost model of its earlier years.

Gross margins remain best-in-class at over 73%, and operating margins are steadily improving despite significant investment in Confluent Cloud. With a current ratio of nearly 4 and a cash ratio above 3, the company has a liquidity cushion wide enough to comfortably support its growth agenda—something many SaaS peers can't claim with the same confidence.

These improvements aren’t cosmetic. They indicate genuine progress toward long-term profitability, even as the company leans into a generational platform shift in enterprise IT. It’s the kind of financial discipline that makes a growth story investable.

Mispriced Momentum in a High-Multiple Neighbourhood

To contextualise Confluent’s current valuation against high-growth infrastructure peers, the chart below reveals a compelling divergence worth investor attention

Valuation lagging growth—anomaly or asymmetric opportunity in plain sight?

This is where things get interesting. $Confluent, Inc.(CFLT)$ currently trades at around 7.8x forward sales, while $Snowflake(SNOW)$, its most comparable AI-adjacent peer, trades closer to 12x. Despite Snowflake’s larger size, Confluent is showing similar growth in subscription revenue and superior expansion metrics—yet its multiple doesn’t reflect that strength.

Add to this a PEG ratio of 0.54, and you’re looking at a stock with a rare combination: high growth at a value multiple. It’s a setup you don’t see often in the current tech market—particularly not in companies this well aligned with AI infrastructure demand.

More importantly, Confluent Cloud revenue is growing at 34% year-over-year, indicating a structural shift to higher-margin, usage-based revenue. If that trend holds, I expect meaningful operating leverage to emerge by 2026, serving as a natural catalyst for a valuation re-rating.

One Risk to Watch—And Why It’s Contained

The most visible concern is leverage. With a debt-to-equity ratio north of 115%, the capital structure looks heavy. But that headline number needs context. Confluent’s cash ratio of 3.24 and nearly $1 billion in liquidity provide a strong buffer, and interest coverage has improved significantly over the last three quarters.

Crucially, the company is generating more operating cash flow quarter by quarter, meaning it’s moving from needing capital to funding growth internally. In short, this is not a debt bomb waiting to go off—especially not with gross margins above 70% and falling operating losses.

Sometimes the smartest bets don’t look like bets at all

Asymmetric Upside for Long-Term Thinkers

Confluent is often misunderstood as a niche middleware company. But in a world where AI runs on fresh, fast-moving data, infrastructure like this becomes foundational. Its financials are improving. Its product is becoming indispensable. And its valuation hasn’t caught up.

With the stock trading around $24.60 and the average analyst target at $28–30, I see a clear 15–20% upside over the next 12–18 months, with further optionality if Confluent Cloud margin expansion plays out as expected.

For investors who prefer to bet on the platforms behind the platforms—rather than the apps built on top—$Confluent, Inc.(CFLT)$ might just be the hidden AI play hiding in plain sight.

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