Confluent Inc., a provider of real-time big data streaming tools, reported fourth quarter earnings and revenue that topped Wall Street’s expectations today. However, its guidance for the coming quarter failed to excite investors and its stock barely moved in after-hours trading.
The company reported a loss before certain costs such as stock compensation of 9 cents per share, better than Wall Street’s target of a 14 cent loss. Revenue for the period came in at $169 million, up 41% and ahead of the $164.3 million consensus estimate. All told, that resulted in a net loss of $115 million for the quarter.
Confluent also reported full year fiscal 2023 revenue of $586 million, up 51% from a year earlier.
Confluent is a rising player in the big data industry, known as the primary developer of the popular Apache Kafka open-source software that’s used to track data points such as sales, trades, orders and customer responses in real-time. This data is delivered to customers via real-time streams, and Confluent’s software allows them to analyze it almost instantly. It’s an extremely useful capability that has been adopted by as much as 80% of the Fortune 500.
The rapid growth of Confluent can be put down to its Confluent Cloud platform, which is an enterprise-grade version of Apache Kafka that can be deployed on public cloud platforms such as Amazon Web Services, Google Cloud and Microsoft Azure. The main benefits include easier deployment and fewer management hassles. Alternatively, some customers use the Confluent Platform for on-premises deployments.
Confluent Cloud continues to be the company’s main growth engine, with its quarterly revenue up 102% year-over-year to $68 million. For the full year, Confluent Cloud generated $211 million in revenue, up 124%.
Confluent also reported strong growth with its customer base. It said it ended the quarter with 991 customers that generate at least $100,000 in annual recurring revenue, up 35% from a year earlier.
Holger Mueller of Constellation Research Inc. said Confluent is in a strong position because when enterprises need to work with streaming data, they inevitably turn to the company.
“It has proven to be surprisingly recession-proof, with its annual revenue rising more than 50% and quarterly revenue up more than 40%,” the analyst said. “Investors will take notice that Confluent is also investing into its business at a faster clip than its revenues are growing, and the result is that its total loss for the year widened. However, the company may well have enough to grow itself into profitability, as its quarterly loss narrowed. It’s a valid strategy and the next full year will show if it’s possible or not.”
During the quarter, Confluent announced plans to expand the capabilities of its platform by acquiring Immerok GmbH, which sells tools for developing stream processing applications that rely on real-time data.
The company’s co-founder and Chief Executive Officer Jay Kreps (pictured) said its software is valued by enterprises because it helps them to unlock richer customer experiences, more intelligent and efficient backend operations and new, data-driven business opportunities. “Our position as the category leader is illustrated by the 124% year-over-year growth in FY’22 Confluent Cloud revenue, 35% year-over-year increase in customers with $100k+ ARR, and a healthy dollar-based net retention rate of just under 130%,” Kreps said.
Confluent may well be a category leader, but that doesn’t mean there are any guarantees it will continue to grow at such a rapid pace. Indeed, the company offered somewhat cautious guidance for the coming quarter and full year. For the first quarter of fiscal 2023, it said it sees a loss of between 15 cents and 13 cents per share with revenue in a range of $166 million to $168 million. That’s more or less in-line with expectations, with Wall Street targeting a 15 cent per share loss on sales of $168.1 million.
For the full year, Confluent said it sees revenue of between $760 million and $765 million, the midpoint of which tallies with Wall Street’s estimate of $762.8 million.